Business Math Ch 21: Stocks - Stocks, Dividends, Investment

Calculate the yield of the following stock. Yearly dividend of $0.09 and closing price per share $9.58.

0.09/9.58 0.0093945 x 100 0.93945

Dividends in arrears mean:

A specific amount of dividends have not been paid.

The price-earnings ratio is calculated by the closing price per share of stock divided by:

Annual Earnings per Share P/E ratio is calculated by ending stock price of company divided by annual earnings per share. P/E ratio is used for valuation of company stock. P/E ratio denotes for one dollar of earnings, how much an investor willing to pay. So the valuation method shows the investor confidence on the company stock.

A single bond with a face value of $1,000 has a stated annual interest rate of 7.6%. The last bond traded on this day was 98.45%. Determine the bond yield.

Bond Yield = Yearly Interest / Cost of Bond at Closing $76/$984.50 7.7%

Which type of investment has a stated face value and interest payments at a stated rate?

Bonds are sold with a stated face value to be paid at a future date, and a stated interest payment.

Which investment instrument must be paid first in the event that a company goes bankrupt?

Bonds have first claim to a company's assets in the event of bankruptcy.

Telson Company paid a dividend of $2.89 per share to stockholders. They had 10,000 stocks issues and outstanding. Macy owned 2,000 of these shares. How much is the cash dividend owed to all stockholders?

Cash Dividend owed to all stockholders is Dividend per Share × total number of shares. $2.89 × 10,000 = $28,900.

Telson Company paid a dividend of $2.89 per share to stockholders. They had 10,000 stocks issues and outstanding. Macy owned 2,000 of these shares. How much is the cash dividend to the remaining stockholders, not including Macy?

Cash Dividend owed to remaining stockholders is Dividend per Share × remaining number of shares. $2.89 × 8,000 (10,000 shares less Macy's 2,000 shares = 8,000 remaining)= $23,120.

Which statement is true about bond trading commissions?

Commission rates vary.

NAV expresses the value of the:

Mutual Fund

Diversification, professional management, liquidity, low fund expenses, and access to foreign markets are the main reasons investors are attracted to which investment type?

Mutual Funds

Stock funds, bond funds, and balanced funds are all examples of which type of investment?

Mutual Funds

Dividends are based on which financial report item?

Net Earnings

At the beginning of the year, Camille purchased 300 shares of stock at $25.50 per share, then sold them at the end of the year for $28.70 per share. She paid a 1% commission on both the purchase and sale of the stock. Current dividends per share of $2.00 are in effect. Determine the net gain.

Net gain is the difference between the total cost and total receipts. $8,523.90 - $7,726.50 = $797.40 net gain.

Bond quotes are stated in:

The market prices of bonds are quoted as a percentage of the bonds' par (face) value.

A debt instrument used to raise money without diluting the ownership is a:

bond.

Stock yield is found by the annual dividend divided by the:

current stock price

The term Arrears means:

money that is owed and should have been paid earlier.

NAV indicates the dollar value of:

one share

Certificates that represent a percentage of ownership in a company and sold to raise money to finance operations and expansions are

stocks

Common stockholders have the right to _____________.

vote

Preferred stockholders do not have ____________, but they receive preference over common stockholders in __________________ and in the company's assets if the company goes bankrupt.

voting rights; dividends

The yearly interest of a bond is the face value of the bond:

"Times the stated yearly interest rate" The stated interest rate of a bond is the annual interest rate that is marked on the face of the bond. Therefore the stated interest rate multiplied by the bond's face amount results in the annual amount of interest that must be paid by the issuer of the bond.

Bonds are usually in denominations of:

$1,000

A single bond with a face value of $1,000 has a stated annual interest rate of 7.6%. The last bond traded on this day was 98.45%. Determine the cost of bond at closing.

$1,000 is the face value. Multiply this by the closing rate to find the cost of bond at closing. $1,000 × .9845 = $984.50.

Assuming a 1% commission, calculate the total cost of buying 200 shares of CVS at $102.91.

$102.91 x 200 = $20,582 Commission Rate on 200 shares: $20,582 x 0.01 = $205.82 Total Cost of Shares: $20,582 + $205.82 = $20,787.82

Calculate the missing value for American Express given earnings per share of $2.95 and a price-earnings ratio of 26. What is the closing price per share?

$2.95 x 26 $76.70

Calculate the missing value of Bell South with Earnings per share of $2.55, Closing Price of Share is $27.54. What is the Price-earnings ratio?

$27.54/$2.55 $10.80

The current market value of the Social Suite fund is $4,000,000. Current liabilities are $250,000. There are 800,000 shares outstanding. What is the fund's NAV?

($4,000,000 - $250,000)/800,000 $4.69

A bond quote of 82.25 in dollars is equal to:

(82.25/100) x 1000dollars 82.25 x 10dollars $822.50

Bee Sting bought 400 shares of Google at $1238.16 per share. Assume a commission of 2% of the purchase price. What is the total to Bee?

1,238.16 x (2/100) = 24.7632 Price after commission = 1,238.16 + 24.7632 $1,262.9232 Total = 400 x $1,262.9232 $505,169.28

Calculate the cost (omit commission) of buying the 1,400 shares of Apple at $126.00.

1,400 x $126.00 $176,400

Calculate the cost (omit commission) of buying the 1,800 shares of Apple at $126.40.

1,800 shares x $126.40 $227,520

The 300 shares of General Mills stock bought at $70.20 were sold at $55. Commission is omitted. What would be the loss?

300 x $70.20 = $21,060 300 x $55 = $16,500 $21,060 - $16,500 = $4,560

Myra bought 400 shares of Google at $399.75 per share assume a commission of 2% of the purchase price what's price what's the total to Myra

399.75 x (2/100) = 7.995 Price after commission = 399.75 + 7.995 $407.745 Total = 400 x $407.745 $163,098

A stock price will rise if:

Demand for stock is greater than supply

Which of the mutual fund advantages refers to the ability to invest in many companies at once. A) Access to Foreign Markets B) Low Fund Expense C) Liquidity D) Diversification E) Professional Management

Diversification

Ace Corporation pays its cumulative preferred stock $1.95 per share. There are 40,000 shares of preferred and 80,000 shares of common. In 2016, 2017, and 2018, because of slowdowns in the economy, Ace paid no dividends. Now, in 2019, the board of directors has decided to pay out $600,000 in dividends. The common stockholders receive:

Dividend=Preferenceshares×Dividendpershare×Numberofyears 40,000shares×$1.95pershare×4years=$312,000​ Equitydividend=Totaldividend−Preferencedividend $600,000−$312,000 $288,000​

A bond closed at 102.25. The current yield is 10.4%. The annual interest is:

Dollar price of the bond = 1000 x 102.25% = 1022.50 Annual interest = dollar price x current yield = 1022.50 x 10.40% = 106.34

A bond that closed today at 94 down 2 closed yesterday in dollars at:

FV of bond = 1000 Close at 94 Closing value = 940 Down 2 means a 2% decrease in bond price from previous day = $20 decrease. Yesterday's close =940+20=$960

Flinn bought 100 shares of a mutual fund with a NAV of $18.10 and a load charge of 3%. What did Flinn pay for the 100 shares?

Flinn paid $18.64 times 100 shares or $1,864.

A mutual fund is made up of:

Many Stocks, no limit Mutual fund is made of dividend paying stocks. Mutual fund is a managed investment fund that pools money from many investors to purchase securities.

Purchases of fewer than 100 shares of stock are called ___________________.

Odd Lots

Flinn bought 100 shares of a mutual fund with a NAV of $18.10 and a load charge of 3%. What is the offer price?

Offer price = NAV + Load Charge. $18.10 × 1.03 = $18.64.

The price-earnings ratio measures the relationship between the closing price per share of stock and the annual earnings per share. What is the formula?

PE Ratio = Last price per share of stock / Annual earnings per share

Jangles Co. earned $1.80 per share. Assuming a closing price of $40, the PE ratio is (round to the nearest whole answer):

PE Ratio = Market price per share/Earning per share 40/1.80 22.22

Telson Company has the following stock quotations. DIV: 2.89 PE: 7.34 CLOSE: 43.21 What is the price-earnings ratio (PE)?

PER = Closing Price / Annual Earnings per Share 7.34

Given: 10,000 shares cumulative preferred stock ($1 dividend per share): 20,000 shares common stock. Dividends paid: 2018, $4,000; 2019, 0; 2020, $80,000. How much will the preferred stockholders and the common stockholders receive each year?

Preferred Dividend: 10,000 x $1 Preferred Stockholders 2018: $4,000 2019: $0 2020: $26,000 Common Stockholders 2018: $0 2019: $0 2020: $54,000

The stock of VIC Corporation is trading at $39.63. The price-earnings ratio is 16 times earnings. The earnings per share for VIC Corporation are:

Price to earnings ratio = Market price / Earnings per share Earnings per share = Market Price / Price to earnings ratio 39.63/16 = $2.48 per share

Bond yields are:

Quoted as annual rates of return and assume the bond is purchased today at the stated price and sold one year from today.

At the beginning of the year, Camille purchased 300 shares of stock at $25.50 per share, then sold them at the end of the year for $28.70 per share. She paid a 1% commission on both the purchase and sale of the stock. Current dividends per share of $2.00 are in effect. Calculate the rate of return.

Rate of Return = Total Gain/ Total Cost $1,397.40/$7,726.50 = 18.09%

Shares are typically traded in groups of 100 called ___________.

Round Lots

An approximate measure of how long it will take a bond to triple in value is the:

Rule of 115

The stock yield tells stockholders that the dividend per share is returning a rate to investors. Its is calculated by formula:

Stock Yield = Annual Dividend per share / Todays last price per share.

The stock of MNC Inc. pays a dividend of $3.44. The stock opened at $89.19 and closed at $90.28. The stock yield is:

Stock yield =((Closing price - opening price + dividend)/opening price )*100 =((90.28-89.19+3.44)/89.19)*100 5.08%

The stock of Company X pays a dividend of $.88. The stock opened at $18.25 and closed at $18.33. The stock yield is?

Stock yield=Dividend/Beginning value =(0.88/18.25) =4.82%

Who is allowed on the floor of the stock exchange?

Stockbrokers and their representatives.

According to the Rule of 115, a bond with a 10% rate of return will take how long to triple in value?

The rule of 115 suggests that it will take 115/10 = 11.5 years for the bond to triple in value.

At the beginning of the year, Camille purchased 300 shares of stock at $25.50 per share, then sold them at the end of the year for $28.70 per share. She paid a 1% commission on both the purchase and sale of the stock. Current dividends per share of $2.00 are in effect. Calculate the total gain.

The total gain = net gain + dividends. $797.40 + $600 = $1,397.40.

A single bond with a face value of $1,000 has a stated annual interest rate of 7.6%. Determine the annual amount of interest.

The yearly interest = face value of the bond × stated interest rate. $1,000 × .076 = $76.

How are stockbrokers compensated for facilitating trades?

They receive a commission on the buying and selling of stocks.

Calculate the total dollar amount you would pay at the quoted price (disregard commission or any interest that may have accrued). Company: Wang Bond Price: 104.75% # Bonds Purchased: 5 Total dollar amount of purchase price: ?

Total Dollar Amount = Bond Price x # Bonds Purchased

True or false: Some companies do not pay out dividends.

True

True or false: The value of a mutual fund share is expressed in the share's net asset value.

True

TOX bond 7.55 yields 11%. The bond traded at a low of 71.25 and closed today at 71.625 + 0.75. The closing price yesterday was:

Yesterday's Price = Today's Price +/- Adjustment 71.625 - 0.75 70.875

ARUN stock closed at $8.11 + $0.33. Yesterday's closing price was:

Yesterday's closing price was = $8.11 - $0.33 = $7.78