The Stock Market Game

1. The Stock Market Game

2. Directions for the Teacher • Make copies for each student of the worksheet, “Stock Market Simulation”. • Review the “Introduction to the Stock Market” on the power point. (30 min.) • Review the “Stock Market Game” directions on the PPT. • There are 6 different years that your students will calculate. Complete one or two years a day. I usually display the year at the beginning of the period as their warm-up activity. • Be sure to model the first year. If students are absent have them complete only the years they are present for. Since they cannot buy or sell stock, the profit for the year 1929 will determine the winner.

3. Pair-Share • What is stock? • Why would someone want to buy stock? • Do you think you will speculate in the stock market some day?

4. Objective: • Students will be describe the causes of the stock market crash by completing a stock market simulation game.

5. Stock Market Vocabulary

6. Stock • An instrument that signifies an ownership position in a corporation. • Most stock also provides voting rights, which give shareholders a proportional vote in certain corporate decisions. • Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. • For example, if a company has 1000 shares of stock outstanding and a person owns 50 of them, then he/she owns 5% of the company.

7. Film Clip: What is Stock?

8. Share Certificate • A legal document issued as proof of ownership in a firm. In the modern stock markets, the 'paper' share is now being replaced by the 'electronic' share.

9. Stock

10. Stockholder • A person who owns stock in a corporation • Along with the ownership comes a right to declare dividends and the right to vote on certain company matters, including the board of directors.

11. Broker • The person who works on behalf of a investor in the stock market to buy and sell stock

12. Film Clip: How Stock Works

13. Dividends • Dividends are payments made by a corporation to its shareholder members. • It is the portion of corporate profits paid out to stockholders.

14. Prospectus • a printed statement that describes a business and that is distributed to prospective buyers, investors, or participants

15. Line of Credit • A loan of money. • Interest (a percentage of the loan) must be paid on the amount of the loan. • If you are given a 1000 dollar loan at 10% interest, you pay 100 dollars.

16. Buying on Margin • A risky technique involving the purchase of securities with borrowed money, using the shares themselves as collateral.

17. Current Day New York Stock Exchange

18. The Stock Market Game

19. Directions: The Stock Market Game • You have a list of companies in front of you. • Most of the stock companies existed in the 1920’s. • Some became successful, others failed.

20. Directions: The Stock Market Game • Read each prospectus and decide which stocks you want to purchase.

21. Directions: The Stock Market Game • Each student will get a worksheet: • “The Stock Market Simulation Game”

22. Directions: The Stock Market Game • In the game there will be 7 price changes between 1920 and 1929, when the game ends. • There will be no buying and selling of stock during the game. • You will sell your stock only at the end of the game and then calculate your total profit or loss.

23. Directions: The Stock Market Game • Each student is given $300 to invest and a pre-approved credit line of $200.

24. Directions: The Stock Market Game • All company stock prices start at $10 per share in 10-share certificates (beginning price of $100 per certificate)

25. Directions: The Stock Market Game • After the 1929 announcement the market closes and each student will calculate the total for all of their stock certificates at the current market value (less any outstanding debt). • The student with the most money at the end of the simulation is the WINNER!

26. Complete your worksheet Now! • Remember all company stock prices start at $10 per share in 10-share certificates (beginning price of $100 per certificate) • This means you can buy stock in up to 5 different companies. • You can choose to use your line of credit ($200) or not! If you don’t use it, you lose it. • You must use all your cash ($300) to purchase stock.

27. Announcement! • The Stock Market it now open!!! • You have 5 minutes to buy stock!!!

28. Announcement! • The Stock Market it now closed!!!

29. 1920 Add the current stock prices on your worksheet under the year 1920

30. Calculating Profit or Loss • Write down the current stock prices of the stock you OWN. Remember, you cannot buy or sell your stock. • Calculate your profit or loss. • A x B = D (price per share x # of shares owned) • Calculate new total at bottom of column “D” • Subtract “NEW” total from “OLD” total. If the number is less than in 1918 then at a negative sign in front of the number. Put this number on the bottom of the last column. • Double-check your calculations by calculating the profit and loss for each stock you own.

31. Calculating Profit or Loss • Please watch as the teacher shows you how to calculate your profit or loss. • Check your partner’s calculations. • Raise your hand if you would sell your stock at this point. • Raise your hand if you think you are making the most profit?

32. 1923 Special News Bulletin! • President Harding is suffering from a coronary seizure and may have pneumonia. He is reported to be dying. The stock market will close for new postings. • Harding Dies-------------------------------------------------------------- Stock Prices Per Share Kroger $13 Radio Corporation $13 Mammoth Oil $16 Gotham Bank $10 Durant Motors $ 4 Midland Power $19 Kansas Pacific $9 Tele-Tone $19

33. 1925

34. 1927

35. 1928

36. 1929Special Announcement • Wednesday, October 23, 1929 • The Market slipped today as the government announced that home construction, an indicator of prosperity, was at an all time low. • The Federal Reserve Board also announced that a change in the prime interest rate would take place in the near future; speculation on the stock market is getting out of hand. • It is rumored that the House of Morgan intends to sell 12 million shares of common stock at a loss, before interest rates change. • The Gotham Bank announced that margin buyers of stock are being notified that they must put up more money to cover today’s losses.

37. Tuesday,October 29, 1929(Black Tuesday) Panic hits Wall Street. 12 million shares are traded in one day on the New York Exchange. $700 is lost by stock holders in one day as the market takes the greatest dive in history Stock Prices Per Share Kroger $8 Radio Corporation $4 Mammoth Oil $2 Gotham Bank $12 Durant Motors $12 Midland Power $3 Kansas Pacific $8 Tele-Tone $6

38. The End of the GAME! • Calculate the total for all of your stock certificates at the current market value (less any outstanding debt). • The student with the most money at the end of the simulation will be the WINNER!

39. Review Questions: • Why do you think you were successful (made a profit) or not (lost money)? • What will happen to the bank if thousands of people are unable to pay their loans back? • What do you think would happen if the banks went out of business? • What do you think would happen to the companies used in this simulation after the stock market crashed? • What would happen to the people who worked for those companies? • If you were living during the Great Depression and lost your job and all your money in the stock market and/or because of bank closures what could you do to survive?