1 / 24

Chapter 21

Chapter 21. Stocks, Bonds, and Mutual Funds. #21. Stocks, Bonds, and Mutual Funds. Learning Unit Objectives. Stocks. LU21.1. Read and explain stock quotations Calculate dividends of preferred and common stocks; calculate return on investment. #21. Stocks, Bonds, and Mutual Funds.

starbuck
Download Presentation

Chapter 21

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter 21 Stocks, Bonds, and Mutual Funds

  2. #21 Stocks, Bonds, and Mutual Funds Learning Unit Objectives Stocks LU21.1 • Read and explain stock quotations • Calculate dividends of preferred and common stocks; calculate return on investment

  3. #21 Stocks, Bonds, and Mutual Funds Learning Unit Objectives Bonds LU21.2 • Read and explain bond quotations • Compare bond yields to bond premiums and discounts

  4. #21 Stocks, Bonds, and Mutual Funds Learning Unit Objectives Mutual Funds LU21.3 • Explain and calculate net asset and mutual fund commissions • Read and explain mutual fund quotations

  5. Stocks Common Stock - Stock that allows owners to have voting rights Stock - Shares of ownership in a company Preferred Stock - Does not allow voting rights, but gives preference over common stockholders in dividends Cumulative preferred stock - entitles its owners to a specific amount of dividends in 1 year

  6. Stocks Dividends - Payments to shareholders from profit Stockholders Elect Board of Directors Elect Officers of Corporation Dividends in arrears - Payments owed to cumulative preferred shareholders

  7. How Stocks Are Traded Stock exchanges - An orderly trading place for stock. Stockbrokers - people who buy and sell stock on the floor of the exchanges. They charge a commission for trading stocks.

  8. Stock Quotations in Newspaper’s 52 weeks YLD VOL HI LO STOCK (SYM) DIV % PE 100s LAST 43.95 32.85 Home DPT .90 2.3 14 178416 39.92

  9. Stock Quotation Calculations Stock yield = Annual dividend per share = $.90 = 2.3% Today’s closing price per share $39.92 Earnings per share = Annual earnings . Total number of shares outstanding *Earnings Per Share are not listed on the stock quote PE Ratio = Closing price per share of stock = $39.92 = 14 Annual earnings per share $2.85

  10. Dividends on Preferred and Common Stock Stock records for You Corporation show the following: Preferred stock issued: 20,000 shares. In 2009, Sony paid no dividends Preferred stock cumulative at $.80 per share. In 2010, Sony paid $512,000 in Common stock issued: 400,000 shares dividends. 2009 Dividends paid 0 Preferred stockholders Paid: 0 Owe: 20,000 x $.80 = $16,000 Common Stockholders 0 2010 Dividends paid $512,000 Paid for 2009 16,000 Paid for 2010 16,000 32,000 Total dividend 512,000 Paid preferred for ‘09 & ’10 -32,000 Common Stockholders $480,000 $480,000 = $1.20 per share 400,000 shares

  11. Return on Investment Suppose you bought 200 shares at $21.25 and sold them 1 year later at $27.50. With a 1% commission rate buying and selling the stock and a current $.21 dividend per share in effect what was your return on investment? Bought 200 shares at $21.25 = $4,250.00 Commission at 1% = 42.50 Total cost $4, 292.50 Sold 200 shares at $27.50 = $5,500 Commission at 1% = - 55 Total cost $5,445 Total receipt $5,445.00 Total cost -4,292.50 Net Gain $1,152. 50 Dividends + 42.00 (200 x $.21) Total Gain $1,194.50 $1,194.50 $4,292.50 27.83% Return on Investment

  12. Bond Quotations in Newspaper’s Current Net Bonds Yield Vol. Close change IBM 8 3 19 7.0 5 120 1 +1 8 2 *Bonds are stated as a percent of face amount Yearly Interest = Face value of bond x stated yearly interest rate $83.75 = $1,000 x .08375

  13. Bond Quotations in Newspaper’s Current Net Bonds Yield Vol. Close change IBM 8 3 19 7.0 5 120 1 +1 8 2 Yearly interest: = $83.75 = (.08375 x $1,000) = .0695 = 7% Cost of bond: $1,205 (1.205 x $1,000)

  14. Calculating Bond Yields Bond yield = Total annual interest of bond Total current cost of bond at closing Sue Lawson bought 5 bonds of IBM at the closing price of 1201/2. What is Sue’s interest? (Remember that in dollars 120 ½ is $1,205) 5 bonds x $83.75 interest per bond per year $418.75 = 6.95% = 7% $ 6,025 5 x $1,205

  15. Why Investors Choose Mutual Funds Diversification Professional management Liquidity Low fund expenses Access to foreign markets

  16. Net Asset Value Mutual Fund - A portfolio of stocks and/or bonds Net Asset Value (NAV) - the dollar value of one mutual fund share NAV = Current market value of fund’s investment - Current liabilities Number of shares outstanding

  17. Commissions: Mutual Funds Classification Commission charge Offer price to buy No-load (NL) fund No sales charge NAV (Buy directly from investment company) Low-load (LL) fund 3% or less NAV + commission % (Buy directly from investment company or from a broker) Load fund 8 1 % or less NAV + commission % (Buy from a broker) 2

  18. Mutual Fund Quotations in Newspaper’s FUND YTD NAME NAV CHG % RET Grln P 18.43 -0.09 4.1 Name of Fund Fund return this year NAV plus the sales commission Changes in NAV versus the previous day

  19. Problem 21-19 A. PE= $29.25/ $4.80 = 12 B. Yield = $1.40/ $59.25 = 2.4%

  20. Problem 21-21 Today: 5 x $1,008.75 (1.00875 x $1,000) = $5,043.75 Yesterday: 100 7/8 – 1 1/8= 99 6/8 = 99 ¾ 5 x $997.50 (.9975 x 1,000) = -4,987.50 $ 56.25

  21. Problem 21-23 79 ¼% = 79.25% = .7925 x $1,000 = $792.50 $57.50/ $792.50 = 7.3% (5 ¾% = 5.75% = .0575 x $1,000 = $57.50)

  22. Problem 21-24 A. 88 ¼% = 88.25% = .8825 x $1,000 = $882.50 $882.50 x 5 = $4.412.50 + $25.00 = $4,437.50 B. 1175 x $1,000 = #117.50 x 5 = $587.50 C. $117.50/ $883.50 = 13.3%

  23. Problem 21-26 • $ 43.62 x 200 $8,724.00 + 261.72 (.03 x $8,724) $8,985.72 total cost • $43.62 Thursday price - 2.08 (Wed. price $2.08 lower) $41.54 Wed. price per share x 200 $8,308.00 + 249.24 (.03 x $8,308) $8,557.24 total cost

  24. Problem 21-29 $1,585 dividends received X .28(tax bracket) $443.80

More Related