Grades 9–12 · Lesson 3 · 60 minutes
Valuation and expected return
Students estimate whether a simulated share is relatively expensive or inexpensive and calculate expected return.
StockSt uses fictional currency and simulated shares for education only. This is not investment advice.
Warm-up
Show two shares with the same price but very different recent histories. Ask, “Are these equally expensive?” Use the answers to introduce the idea that a price only means something when compared with what you receive for it.
Mini-lesson
- Introduce price-to-earnings-style comparison using StockSt’s fictional metrics: divide a share’s price by a simulated earnings or engagement measure and compare the result with similar shares.
- Teach expected return: expected return equals the expected future price minus the current price, divided by the current price. Work one example on the board, such as a share priced at 50 with an expected future price of 56, which gives an expected return of 12%.
- Emphasize that a higher expected return generally requires accepting greater uncertainty.
StockSt activity
- Students forecast a target price for one share over a defined simulation period.
- Students justify the target with at least three data points.
- Students calculate the expected return and identify what would make their forecast wrong.
Discussion
Ask, “What is the difference between a prediction and a guess?” Guide students toward the idea that a prediction states its evidence and its assumptions and can be tested.
Exit ticket
Students calculate the expected return for a provided example.
Assessment
Forecast memo containing thesis, target price, expected return, assumptions, and downside scenario.
Student Learn links
Assign these before or after class so students practice the same ideas.