Unit Two (Parsons) - Stocks

Question 1

why should you consider investing young?

Answer 1

Entering early makes a big difference → time on your side

cash sitting in the bank doesn’t make you money … stocks are smart

Question 2

What is a Share of stock?

Answer 2

Volume of shares x the share price

Question 3

What is an index?

Answer 3

collection of companies and their performance

Question 4

What is a corporation?

Answer 4

A Buisness owned by stockholders who share in its profits but are not personally responsible for its debts

Question 5

what are advantages of a corporation?

Answer 5

• limited liability (can’t touch you house, only loos the money invested in the stock)
• lots of minds to help solve problems

Question 6

What is disadvantage of a corporation?

Answer 6

• lots of rules and restrictions
• government is involved

Question 7

What is IPO

Answer 7

How many shares you want to offer x the perceived value of the company = the price of your stock

Question 8

What is the main difference between a public and private corporation?

Answer 8

You can protect your assets by finding their own investors where as a public corporation uses IPO (initial public offering) and can sell shares in the company on the stock exchange

Question 9

What is an advantage and disadvantage about a public corporation?

Answer 9

• gives up a lot of control (board of directors elected by the shareholders must approve all decisions)
• this can allow for bright minds to help find solutions
• makes sure CEOs are making smart choices for the company
• is safe
• has to disclose if selling the stocks of the company

Question 10

what is a sole proprietorship or partnership?

Answer 10

sole proprietorship –> one sole owner of a Buisness

partnership –> multiple people own the Buisness

Question 11

what are the pros of a sole proprietorship and partners ship?

Answer 11

• government won’t interfere
• huge tax advantages
• freedom and not restricted

Question 12

what are the cons of a sole proprietorship and partners ship?

Answer 12

• unlimited liability (their personal assets are at risk)
• need cash flow (at the start generally negatives)

Question 13

What is perceived value?

Answer 13

• a customers own perception of a product or service’s merit or desirability to them especially in comparison to a competitors product
• the more valuable a company the more expensive their stock may be
• as more people invest into a company they grown more and more which can lead to stock split

Question 14

What is a stock split?

Answer 14

Brings down the value of a stock.

So more people buy it –> more investors –> more capital

adding more shares which in turn depletes the value

Eg. If one stock is 300$ and the split to cost 150$, two shares are now equivalent to 300$

Question 15

What is reverse stock split?

Answer 15

Makes a stock more expensive and brings the value up

Eg. if a company is trading under a dollar they could be de listed, so they will reverse stock split to get the price above a dollar

Question 16

what is diversification?

Answer 16

when you don’t rely on only one stock (this is risky)

Question 17

What is a penny stock?

Answer 17

trading for 3-5$, companies don’t make a ton of money, a lot of volatility, short term

Eg. Blackberry stock had just tanked, supposed to have a new phone to save them, if you enter low, might catch the wave because of the hype

Question 18

what is a blue chip stock?

Answer 18

• safe investments, long term over time will slowly increase

Eg. Apple

Question 19

what is a large cap?

Answer 19

capitalization of the stocks of a company with market values greater than 10 billion dollars

Question 20

what is a mid cap?

Answer 20

capitalization of the stocks of a company with market values between 3 to 10 billion

Question 21

what is a small cap?

Answer 21

capitalization of the stocks of a company with market values less than 3 billion

Question 22

why do politics impact stock?

Answer 22

They impact what people do or don’t invest in.

Eg. Biden was elected, many people invested into clean energy stock knowing he has trillions of dollars to spend into it.

Question 23

what are dividends?

Answer 23

• low volatility ( not unpredictable)
• for owning some stocks they will pay you for holding the stock (incentive to buy in)
• yield

Question 24

what are growth stocks?

Answer 24

• move with market news
• have the opportunity to grow really fast
• make a lot of money
• risky
• Eg. Vaccination pill he talked about, solar, hydrogen cars

Question 25

What is TFSA?

Answer 25

Tax free savings account (won’t be taxed when you take money out of this account)

Question 26

What is a RRSP?

Answer 26

Government provides a tax right off, giving a percentage of your investment - problem when you go to sell this investment the government will tax you (shouldn’t touch till you retire- as you have less income and tax)

Question 27

What is a RESP?

Answer 27

RESP → Registered Education Savings Plan. This is an account registered with the federal government to help you save for a child’s post-secondary education. The person who opens the plan is the subscriber—usually, but not always, the parent. Government will contribute to it.

Question 28

What was it like 1920s?

Answer 28

roaring 20s (times were good), the economy was growing fast creating lots of opportunities

Question 29

What was the stock exchange like as it had just opened?

Answer 29

Stocks going up
New concept
No regulations → lots of corruption

Question 30

what happened in the 1930s?

Answer 30

great depression caused a domino effect which impacted: families with lots of kids (lots of people to feed)

bank gave out more money unsure they could afford it - buying on margin

the bank wanted people to invest more saying they would get more, market was very volatile (late 1920s)

Edgar H. was president

Question 31

What happened Wed, Oct. 23rd 1929?

Answer 31

During the last hour of trading on this day there was panic selling and the market closes.

Question 32

What happened on black Thursday?

Answer 32

More panic
Someone high up organize a meeting
Take massive amounts of money and buy into big companies
Caused market to recover (becomes calmer)

Question 33

what happened on Black Tuesday?

Answer 33

Market open and everyone sold
Loss of confidence in the market

Question 34

What happened to banks after Black Tuesday?

Answer 34

People would go to the bank to get money back, and they would not have enough and have to claim bankruptcy. Leading to the saying “always keep money under your bed”

Question 35

What happened to unemployment levels?

Answer 35

There was mass unemployment levels:
22-30% in major cities
17% in toronto

People living in extreme poverty

Question 36

What did Roosevelt claim to restore when running for president?

Answer 36

claimed to restore:
Confidence in the government, the banking system, and the stock market
Ensure all banks by creating the federal reserves (bank has safety and security - storage savings)
Sets up the SEC - security exchange commission (like the FBI of the Stock Market) → makes sure trades are ethical and gets rid of corruption

*The differences that he implemented were very significant as his changes are what protect us now

Question 37

What do people begin questioning in the late 1930s?

Answer 37

capitalists → is communism a better way of life, this brings tension and creates extreme political leaders leading to WWII

Question 38

Why did Bin Laden target the twin towers?

Answer 38

It is a symbol of economic prosperity → hurting the economy would cause panic

Question 39

What happened to the stock market when the twin towers were hit?

Answer 39

Market froze → first building hit
Market closed → second tower hit

Question 40

what stocks increased after 9/11?

Answer 40

military and pharmacuticles

Question 41

Why might stocks drop fast?

Answer 41

• Media
• Didn’t make their forecast earnings
• External changes → changes that affect the value of the investment such as interest rate increase
• changes to government policy

Question 42

What is yield?

Answer 42

The percentage of the stock value that you receive.