Description
In this course you will be required to research the stock market and become familiar with stock market performance indicators. You will also take part in a simulation to see just how good of an investor you can be.
It is important to note that you will be monitoring your stocks for a six-week period. You must begin now so that you will have time to complete all parts of this assignment. Plan ahead!
The problem: You have just inherited $100,000 from your millionaire great-uncle. The stipulation is that you must invest it in the stock market until you turn twenty-one. First, you must familiarize yourself with the stock market and then decide what some good investments might be.
Your assignment: Follow the research guidelines explained later in this section as you research and respond to the following questions. You will complete this project in four separate parts. Your findings for each part should include and address each of the proposed questions. You will submit each part as instructed on page 15.
Part 1:
Research: Learn the key terms and basic functionality of the stock market.
- Research the stock market. What is a stock? What is a share? What is an exchange? Identify the various exchanges where stocks can be traded and discuss their similarities and differences (i.e. NYSE, NASDAQ). What types of companies are traded on each?
- Research stock market performance indicators, such as the DOW Jones and S&P 500. What do the indicators measure? How do they help predict the performance of the market? What are their flaws?
- Research the sectors of the market. Identify three companies in each sector.
- Research companies in which you would invest. What characteristics do they have that make them good prospects? In other words, why might you choose to invest in each one of them?
- Compile the answers to these questions in a research report consisting of four to five well-developed paragraphs. This will be the first part of your Research Project.
- Make sure you give credit to the sources you use. (See information later in this section for citing examples.)
Part 2:
Invest: Choose 5–10 companies of your choice to invest your $100,000. Now apply what you have learned about the stock market to the Stock Market Game; complete a six-week stock market game simulation.
- The following two websites ( http://www.howthemarketworks.com and http://www.WallStreetSurvivor.com) have stock market simulation games and you will have the choice of which one you would like to use. You will have to sign up for a free account in order to start this project.Make sure you visit both sites and pick which one you would like to work with. When selecting your game, you will have the option to join a class or play individually. Select play individually.
- Be sure to read the directions on how to play the game, and go to the help screen if you ever have questions. Be sure to contact your teacher if you have any problems with the website or the game.
- While playing the game, be sure to stay active. You will want to check your stock’s progress DAILY and follow the news to get information on your company.
- Give a weekly report for as long as you play the game for your companies. For at least four of your companies, write a weekly summary on the business, earnings statements, or any news having an impact on your company's share prices. Create a table with a report summary for each company for each week during the six-week period.
- Include your reports and summaries in the second part of your Research Project.
Part 3:
Draw Conclusions: After you complete the simulation, you will compile a report on your achievements of the game.
- Did you have overall positive or negative earnings (list the total portfolio amount)?
- What was your most profitable stock? If you did not have any that made you money, which company lost the least?
- What company cost you the most money?
- How many transactions did you make throughout the game, and what was the dollar amount that the transactions cost you?
- Did the transactions have positive or negative externalities on the outcome of your game?
- What was the economy’s overall performance during these weeks?
- Write an overall analysis that discusses your stock investments as well as a general trend you might have noticed in the stock market as a whole. Your analysis should be three to four well-developed paragraphs. This will be the third part of your Research Project.
- Make sure you give credit to the sources you use. (See information later in this section for examples.)
Part 4:
Make Inferences: Discuss what you have learned from this activity.
- Based on your findings, where do you think you might invest the money left to you by your great-uncle?
- Can you think of any other influences that might affect your decision on where to invest your money?
- Identify the things you learned about the economy by participating in this simulation.
- Did you like playing the game, and would you recommend it to others?
- Respond to these questions in three to four well-developed paragraphs. This will be the fourth, and final part of your Research Project.
Explanation & Answer
Your project is complete. Here are all 4 parts. I hope you like it. Please let me know if you ever need anything else :)
Overall, I had negative earnings. My total portfolio amount is $99,404.My most
profitable stock was from Apple. I made about $500 from that company. Verizon cost me
the most money. It cost me $1,037.
I made 6 transactions throughout the game. I divided the $100,000 evenly amongst 5
companies, so I spent roughly $20,000 on investing on each company. I then sold Apple
stock at the end of the game for $500.
My investment of Apple had a positive externality, but the investment in the other 4
companies did not go as well. My selling of Apple was also positive, because I made a
profit from it. In terms of the economy, GDP grew about 0.7% in these weeks according
to recent data, confirming earlier signs that the U.S. economy had experienced a bumpy
ride at the outset of the year. That was the slowest first quarter growth rate in three years.
Consumption was the worst since 2009.
Source: https://www.bloomberg.com/news/articles/2017-04-28/u-s-economy-expands-atslowest-pace-in-three-years
Part 1:
Research: Learn the key terms and basic functionality of the stock market.
1. Research the stock market. What is a stock? What is a share? What is an
exchange? Identify the various exchanges where stocks can be traded and
discuss their similarities and differences (i.e. NYSE, NASDAQ). What types
of companies are traded on each?
A stock represents a claim on a company's assets and earnings. It is the capital raised by a
business or corporation through the issue and subscription of shares. The more stock one
has of a certain company, the more ownership that person has over that company. A stock
exchange acts as a market where the stock can be sold. The primary function of an
exchange is to give sellers a place to liquidate their share holdings. The New York Stock
Exchange provides a way for buyers and sellers to trade shares of stock in companies that
are registered for public trading. The NYSE trades in a continuous auction format.
Nasdaq is an electronic exchange where buyers and sellers are connected only by
computers over a telecommunications network. Investors are required to post their bid for
selling and asking prices. Nasdaq has listing and governance requirements similar to the
NYSE, as a stock must maintain a $4 minimum price.
2.
Research stock market performance indicators, such as the DOW Jones and
S&P 500. What do the indicators measure? How do they help predict the
performance of the market? What are their flaws?
The DOW shows how 30 large publicly owned companies based in the US have traded.
The S&P is a group of 500 companies whose average daily share prices are used to
calculate an index of the day’s security prices. The indexes help predict the performance
of the market because they are always monitoring how well stocks are doing. This data
can help investors to predict when stock prices might go up or down, so they can choose
the best times to buy and sell. A flaw of the DOW is that it onl...
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