Beacon Lesson Plan Library

Who Pays the Bill?

Laura Brown

Description

The students participate in a stock simulation in order to understand the concept of stock, dividend, stockholder, and capital.

Objectives

The student writes notes, comments, and observations that reflect comprehension of fifth-grade or higher level content and experiences from a variety of media.

The student knows different ways that money can increase in value through savings and investment (for example, banks savings accounts, stocks, bonds, real estate, other valuable goods).

Materials

-Chart paper with definitions of stock, dividend, stockholder, and capital
-Table, pitcher(s), large mixing spoon, paper cups

Preparations

1. Get permission from the principal for the lemonade stand.
2. Make a chart with definitions of stock, stockholders, dividends, and capital.

Procedures

Day One

1. Stock game: Thirst-quenchers, Inc.
Explain the following scenario to the students:
-I (the teacher) want to start a lemonade stand on the playground (or another place on the school campus where children get very hot playing). As the teacher, I am the only one in the classroom that the principal will allow to put up a lemonade stand. However, I only have a table, a pitcher, a large spoon, and some plastic cups. The water is free, but I don't have any ice, lemons, or sugar. I am sure the lemonade stand would be a huge success and make lots of money; however, I don't have enough capital to get started.-
2. Give the students the definition of and discuss -capital.-
3. Pose to the students the question of how to solve the problem in the scenario. Lead students to the idea that people could loan the teacher the money for the sugar, lemons, and ice or actually contribute these items in return for a share of the profits (dividends). Explain, discuss, and give a definition of terms.
4. Explain that giving money or resources to a -company- to use, and in return receiving a share of the profits constitutes stockholding. Ask students if they know of any recent start-up companies that might have begun this way. Point out that Microsoft is a fairly new company that began this way. Ask students what would happen to their investments if the company didn't make any money the first year? Point out that sometimes a company produces profits and sometimes it doesn't. Investors have to be aware of the risks.
5. If the school allows, follow up the idea and have the students bring in lemons, ice, and sugar to -buy- stock in the company. One lemon can be 1 share of stock, 1 pound of sugar can be 1 share of stock, etc. Make sure that students know that they will receive the profits based on how much -stock- they purchase based on the resources they provide. Give the company a name and list all stockholders and the shares of stock they have purchased. Explain, discuss, and give a definition of -stockholders.- Announce what day the class can purchase the lemonade. With permission, invite another class to purchase the lemonade to increase the profits.

Day Two
6. Have a lemonade sale. Try to involve all the students, not just the stockholders.
7. Divide the profits (the dividends) out and let students see the return on their investment. Have them compare the cost of what they brought in and the profit they gained. (The students can pool their money and buy something for the classroom.)

Assessments

The students write an explanation that reflects their comprehension of the concept of stocks, stockholders, capital, and dividends, as they understood them through the stock simulation (see attached file). A scoring rubric is attached and should be distributed to the students and explained before the assessment takes place.

Additionally, observe the students during the lemonade activity to note progress toward handling themselves and the resources in a responsible manner.

Extensions

This lesson can be extended into the math time. Allow students to determine the amount of profit, then divide the profit among the shareholders.

Web Links

This website gives definitions and explains the stock market and terms associated with the stock market. The layout is eye-catching, and the language is student-friendly.
KidStock

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