Wednesday, September 28, 2011 How stocks in the stock market
work. Let's say there is a video game store owned by Jared who
has owned it for the last 10 years. Let's say we want to buy
Jared's video game store so that everyone will buy the video
games from us instead of Jared. To find out how much the store
is actually worth, we have to find out how much Jared is making.
If the store is making $200 a day, that means it is making
around $6000 a month. That is about $66,000 a year. So if the
video game store makes that much for the next 10 years, it would
be worth around $660,000. This is simply to figure out how much
money the store will make in a certain period of time. We don't
have to do all this stuff, there are companies that do this for
us. They just tell us how much the store is worth and we decide
to buy it or not. Let's say Jared's video game store is worth
$660,000. If we want to buy it, we give him $660,000 and the
store is ours. Now what if we don't have that much money? What
if we only have half o