Ae 18 Financial Markets

The Great Plebeian College
Don P. Reinoso Street Población

Alaminos City, Pangasinan
2nd Semester A.Y 2021-2022
MIDTERM
AE 18 FINANCIAL MARKETS
Subject
ANGELICA MAE G. SUAREZ

Name
BSA - II
Course
ASSESSMENT:
1. What is a stock?
o A stock is a portion of a company's ownership that is represented by a certificate of stock or

an account statement. A stakeholder is an individual who owns one or more of a company's
shares. A share represents a proportionate shareholdings in the corporation to which it was
issued; there may be numerous series of stocks, each having various classes of equal size and
voting rights. Stocks can be either equity or debt shares in some jurisdictions. These are
financial instruments that provide buyers the right to a portion of a company's earnings.
Stocks are often looked after by investors for their income-generating and growth potential,
as well as for possible capital gains that may be achieved if and when stocks are sold on the
stock market or primary market.
2. Enumerate and discuss briefly the purposes of the stock market.
 The two primary purpose of the stock market are – Capital and Investment Income
o The first purpose is to raise capital for a company through selling shares to investors.

Investors can then sell those shares to other investors to make profit depending on whether
the price rises or a loss when price goes down. Companies utilize this money to grow their
operations, execute research and development projects, and keep their businesses running
smoothly.
o The stock market's second purpose is to generate investment income. Investors purchase
stock in companies in order to make a profit over time by holding the stock and selling it
when the price rises. The stock market allows investors to buy and sell shares with a simple
click on a computer or mobile device, making this accessible to the public.
3. What distinguishes value investing from growth investing?
o Value investing is an approach for acquiring undervalued securities. It is a form of

fundamental analysis that examines financial ratios and an investment's intrinsic value to see
if it is properly valued. Value investors seek out undervalued stocks and buy them in the
expectation that their prices will rise in the future.
o On the other hand, growth investing is more concerned with a company's long-term
prospects. Growth investors seek companies with high growth rates and excellent earnings
potential. These investors are willing to pay higher stock prices because they expect their
earnings to increase greatly in the future, causing the stock price to rise even more.
4. Explain what are bull and bear markets.
o The terms "bull market" and "bear market" are used to describe periods when stock prices
is rising or falling. A bull market is a period in which the stock market is rising. Investors are
more likely to buy shares than sell since they are enthusiastic and confident about the
economy. Prices will continue to rise as demand grows and investors continue to buy.
However, bear markets are periods of decreasing stock prices in which investors get
concerned about future economic situations and sell huge amounts of shares. As a result,
stock prices continue to fall, resulting in increased selling and lower stock values.
5. Discuss how stocks are being traded through:
a. Exchanges
o When you want to invest in stocks, stock exchanges are a great place to go. One of the largest
stock exchanges in North America is the New York Stock Exchange (NYSE). IBM, GE, and
McDonald's are among the top firms in the country. The NASDAQ, which deals primarily in
technology companies, is another significant exchange. Two of the firms trading are Google
and Apple. Buyers and sellers place bids and offers on stocks through an auction system used
by exchanges. Some investors utilize automated trading systems while others engage directly
with brokers to trade on exchanges. Automated trading systems use complex algorithms to
trade numerous stocks at the same time, taking into consideration factors such as price
movements and volume levels.
b. OTC
o Stocks are traded over the counter (OTC) in the United States on platforms called OTC
Markets. OTCQX, OTCQB, and Pink Sheets are examples of these platforms. These
platforms are used to trade stocks that are not listed on a national exchange like the New
York Stock Exchange (NYSE) or NASDAQ. If you want to buy or sell an OTC stock, you
must contact your broker and request that they execute the trade for you. Brokers can only
purchase and sell stocks OTC by calling other brokers and finding a match for your order that
way, as opposed to trading stocks listed on exchanges, which is done electronically and
automatically through market makers. When one broker agrees to work with another, a
transaction takes place. Trading over-the-counter stocks can be tricky, especially given the
significant danger of fraud and scams. OTC stocks are typically traded on pink sheets and
bulletin boards, which are unregulated. Investors can only learn how many shares are traded
and how much it costs to trade through these exchanges. If investors do not have enough
knowledge about OTC stocks, it can be risky.
6. What are the benefits of owning a stock? Explain each.
“Benefits of Owning Stocks”
1. The first benefit of owning stocks is that you have a claim on assets. This means that if the
company goes bankrupt, liquidates, or closes down for whatever reason, you have the right to
claim a portion of the company's assets before anyone else.
2. Dividends and capital gains are the second benefit of stock ownership. When a company
performs well and grows in value, its executives have the option of distributing a portion of those
profits to shareholders in the form of cash dividends, which are paid on a regular basis. If they
instead decide to reinvest those profits back into the firm to fund development and further
growth, the company's value will rise, and your stocks will rise as well.
3. The third benefit of owning stock is that you have the power to vote. It means you can vote on
the company's board of directors' decisions. In this sense, as an owner, you have a voice in how
the firm is managed and run.
4. Finally, you only have limited liability. If you hold stock in a firm, your liability for any legal
claims against it is limited, you can only lose the amount you put in shares; not your personal
properties like home, vehicle, or other possessions.
7. What are the risks of owning a stock? Explain each.
“Risks of Owning Stocks”
1. The first major risk to consider is the loss of capital. You may lose your entire investment if a
company loses enough money to be able to survive. When you invest in a corporation, your
money is gone until the company decides to pay dividends or gives back your share in the event
of bankruptcy.
2. The second major risk is not having a preference for liquidation. When a company is bought
out or declares bankruptcy, liquidation preference owners are paid first, before common
stockholders. This means that if you don't have liquidation preference as an investor, you might
not get any of your money back if the company doesn't have enough assets to pay everyone back.
3. Finally, there is an irrelevant power to vote. As a private company investor, you may be

offered the opportunity to vote on important decisions affecting how the company is operated
and how its money are spent. That doesn't mean you'll be able to influence things in your favor:
private corporations may choose to have no shareholder votes at all or just accept particular
kinds.
8. What are the factors that affect share prices?
o The factors that affect share prices includes the global economy, sector performance,
government policies, natural disasters, and such other factors like interest rate, liquidity and
inflation rate.
9. As a student, what are your thoughts about investing in the stock market?
o As a student, I believe that investing in stock market is a great idea. We should look into it if
we have some money to invest. Saving money and investing it is always a wise idea, and the
stock market is a great way to start. The stock market is unpredictable, but it can also be quite
profitable. You can earn a nice return on your investment if you do your research and invest
wisely. Bonds, mutual funds, and individual stocks are just a few of the different types of
investments available. We can invest for long term and short term goals like for retirement or
invest for a specific purpose in the near future. Another reason to consider for investing in
the stock market is that it provides a long-term growth opportunity. Stocks offer investors the
ability to earn from capital appreciation through selling their shares back when the price
rises, in addition to being a great way to generate money over time through dividends or
interest payments.
10. Summarize in 5 sentences what have you learned in this learning material.
o In this lesson I learned many important things to consider about stock market before
engaging into it. When we buy stock, we are buying a share of ownership in that corporation
and before investing in stock we must be aware of all the risks and benefits we can get from
it. Investing in stocks can help you grow your wealth over time but it can also be risky
because their values can goes down. There are two different ways stocks can be traded; first
is through an exchange, it means that it has been approved to be listed and regulated by that
exchange, which means it must meet certain requirements determined by the exchange; the
other one is through over the counter (OTC), it is traded outside of any formal exchange and
therefore not subject to regulation or approval requirements. It is also important to know that
we can earn a good return on our investment if we conduct sufficient research about
stocks and invest wisely.

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The Great Plebeian College

Don P. Reinoso Street Población

ANGELICA MAE G. SUAREZ

o A stock is a portion of a company's ownership that is represented by a certificate of stock or

2. Enumerate and discuss briefly the purposes of the stock market.

o The first purpose is to raise capital for a company through selling shares to investors.

3. What distinguishes value investing from growth investing?

o Value investing is an approach for acquiring undervalued securities. It is a form of

5. Discuss how stocks are being traded through:

6. What are the benefits of owning a stock? Explain each.

“Benefits of Owning Stocks”

7. What are the risks of owning a stock? Explain each.

“Risks of Owning Stocks”

3. Finally, there is an irrelevant power to vote. As a private company investor, you may be

8. What are the factors that affect share prices?

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