Stock jump in anticipation of interest rate cut. Stock market closed higher on the expectation that this week the Federal Reserve Bank Chairman Ben Bernanke will “act as needed” by cutting the interest rate. Investors believe that economy is showing a sign of weakness based on poor August economic and job reports. It is widely expected that Mr. Bernanke will cut the interest rates on September 18^th to help the economy and credit crisis. The S&P500 gained 31 points, the Dow gained 326 points and the NASDAQ was up by 20 points for the week ending September 14^th, 2007. How do you think the market would react if the Federal Bank does not cut the interest rate or does not cut it deep enough? Let us wait and see what happens.
Record high close for McDonald's shares! McDonald's shares rose to a record high after the fast-food giant disclosed its plans to increase its dividend by 50% this year to $1.50 per share. McDonald mentioned that its strong business growth may allow for more dividend increases in the future. McDonald's shares closed at an all-time high this week at $55.45 per share. Shares gained almost $6 this week. Check out "Your Favorite Stocks" table on the right. What is dividend? When companies make profits, they keep some of the profits (Volume 7) within the company for future use, and return the rest to the shareholders. The portion of the profit that is given back to shareholders is known as dividends. The dividend is the reward to shareholders for investing their money in the company. When McDonald pays $1.50 per share dividend, it means that for every share of McDonald that you hold, you will get $1.50. Thus, if you have 100 shares of McDonald, you will receive a check of $150 ($1.50/share x 100 shares.) When companies are confident of making profits in the future, they may increase the rate of dividend. On average, when a company increases its rate of dividend, its stock price goes up. McDonald’s has sales of close to $23 billion. It is known for McDonald's restaurants, which offer burgers, fries, various food items, and beverages. It operates over 31,000 restaurants in 120 countries and employs over 465,000 people. McDonald's was founded in 1948 and is based in Oak Brook, Illinois.

How does money grow in a bank? When you give your money to the bank, it uses that money to make more money. This allows the bank to give you something extra to keep you happy. It is like a cherry on the top of your ice-cream. The ice cream is your money and the cherry is what the bank gives you extra. This extra money is called interest. Also see Volume 5. How does a bank keep your money safe and still pay you interest? The Bank keeps some of your money at the bank and puts the rest to work. Suppose you deposit your $100 savings in your favorite bank. The Bank will take that $100 and loan it to someone who needs it, but not for free. First, the bank finds out why this person needs money and then checks this person’s credit history for his/her ability to repay the loan. The bank is trying to estimate what are the chances of getting the money back. Second, if the chances for repayment by this person are good then the bank gives (or lends) the money out to this person. When the bank lends the money, it acts as a money lender. The person who needs money from the bank is called the borrower. The amount the person borrows is called the principal. The bank charges extra money on the principal. This extra money that the bank charges from the borrower is called the interest. In addition to the interest, the borrower has an obligation to return the principal in a fixed amount of time. For a principal loan amount of $100, suppose the bank charges $10 interest from the borrower for the fixed time of one year. The bank takes this $10, pays you some of it, say $3, and keeps the remaining $7 for itself. Not a bad deal! You see, the bank is also as smart as you are. When you deposit your money to the bank, it uses that money to make more money by charging more than it pays you and keeps the difference as its profit. So now you and the borrower are happy. You are happy because you got interest on your savings and the borrower is happy because he/she got the money to do what he/she wanted to do, like buying a house, or sending their kids to college, or buying a car. If the bank had not given the borrower the money he/she needed, the borrower would not have been able to do things he/she wanted to do. Are you wondering why the bank gets to keep some money that the borrower pays as interest to the bank? After all, it was your money that the bank gave to the borrower. Well, the bank needs money to do its job: like finding borrowers, making sure that borrowers repay the loan, pay salaries to bank employees, pay for bank security, and many other things that businesses have to do. Banks also need to make some profit for its owners. Sometimes, borrowers fail to repay the loan they took from the bank. Remember, that the bank still has to give you the interest that it promised to you, as well as return your savings ($100 that you deposited in the bank) whenever you ask for it. When borrowers fail to repay, the banks have to make good their promise out of their own pocket. Obviously, it costs money to the bank. So they get to keep some money too.
Learn more about what is Credit History? Why is it important to have a good credit history? Volume 12.
Learn more about what is Currency? What is Foreign Currency Exchange rate? Volume 14.
Learn more about what is Economy, Business, Workers, Goods, Services, Stock, DOW, S&P500, and NASDAQ in Volume 16.

September 10-14, 2007

Weekly Stock Market

Bulls Market-Stocks up!

Index

Change

Last

DOW

Up 326

13,443

S&P500

Up 31

1,484

NASDAQ

Up 20

2,602

**Foreign Exchange Rate**

**($1 is equal to)**
Currency	Change	Last
Euro (€)	-0.01	0.72
Yen (¥)	1.96	115.29
Pound (£)	0.01	0.50
Yuan ()	-0.03	7.52
Rupee (Rs.)	-0.05	40.38

**Your Favorite Stocks**
Company	Bought one stock in Jan-07	This week stock is?	Your gain or loss?
	$34.20	$33.56	-$0.64
	$49.89	$56.15	$6.26
	$43.87	$55.45	$11.58

We use multiple information resources, such as, websites, companies, stock exchanges, newspapers, and others.