The great thing about the stock market is that you can buy stocks from many companies and sell them when you wish. The stock market works in the same way as a flea market. People go to the flea market to check out all of its vendors. The stock market serves as a marketplace for different companies. People can buy and sell stock from many different companies in the stock market. Each company sells its stock at different prices. Stockholders look at the stock market until they find the best prices. The stock market also gives stockholders the freedom to sell stock after it makes a profit. For instance, if someone buys a stock for one dollar and the stock value rises to ten dollars, then that person can sell it to another person for a nine dollar profit. In other words, the stockholder who bought one stock for one dollar made an extra nine dollars by selling it.  People who trade in the stock market use online tools and programs to help them monitor how the market in general is moving, as well as how individual companies are doing. 


 

The Stock Market

Ever since the New York Stock Exchange began in 1792,  the United States has had a stock market. Early stockbrokers looked to Europe for a model to build their system on and decided to base it on the system of Spain. This was largely due to the fact that the U.S. dollar's value had been based on the value of the Spanish real. The real was the Spanish silver dollar and was divided into eight parts. This evolved from the method of counting on the hands, similar to the decimal system. The difference was that the decimal system used the thumbs as part of the number while this other system used the thumbs to denote the total of the four fingers. Therefore, a person would count to four on one hand and then use the thumb to indicate a total while they counted on the other hand. Two thumbs equaled eight. The real could be broken into two, four or eight parts, giving birth to the term pieces of eight.  So when the U.S. stock market began, they based the stock values on one-eighth fractions.

Fractions nor Decimals?

The problem with using fractions is that it has to be translated to match the rest of our decimal-based economy. For example, do you know how many shares of stock at 4  and 3/8 's you can purchase for $4,375? You probably need a few moments with a calculator to realize that $4,375 will buy you 1,000 shares but it would have been fairly obvious in decimal form (4.375).  In 1997, the Common Cents Stock Pricing Act was signed to simplify the stock market by converting the fractions to decimal. This decimalization of the stock market began in August 2000.  Besides simplifying the market, decimalization has dramatically changed how the stock market functions.

Fractions or decimals?

Read the passages. Then determine if the statements below are TRUE or FALSE. 

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PART TWO:

Skill 1

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