SIE Unit 20

Skye purchased 100 shares of Moreno, Inc., for $20 a share. One year later, she sold the shares for $21 dollars. Over the year, Moreno paid a $0.25 quarterly dividend. What was Skye's gain or loss and how much investment income did he earn?

$1 gain and $1 in income Gains are derived from opening and closing trades buy and sell in this example). She bought at $20 and sold for $21, so there is $1 in gain. She collected four quarterly dividends for $0.25 each, so a total in $1 in investment income.

All of these dates are set by the board of directors of a corporation except

the ex-dividend date. The ex-date is set by the market center (i.e., an exchange), or is set by FINRA if it is an over-the-counter traded security.

The Windmill Growth Fund is composed of many stocks from a variety of large companies. It has a stated objective of capital appreciation from holding the stock of the large companies. If you wanted to compare the performance of the fund to the market, which of these indices would be the best?

S&P 500

Your customer purchased 1,000 shares of SmallCo Stock at $10 a share. SmallCo pays no dividends. Exactly one year later, the customer sold the shares for $12 a share. They realized a

$2,000 short-term capital gain. They bought the shares for $10, and sold for $12, so a $2,000 gain. To be a long-term gain the position must be held for more than one year.

Your customer has performed the following trades Bought 200 shares of ABC at $40 Bought 400 shares of ABC at 50 Sold 600 shares of ABC at 55 What is the result of these trades?

$5,000 gain

Drew purchased 100 shares of Moreno, Inc., for $20 a share. One year later, he sold the shares for $21 dollars. Over the year, Moreno paid a $0.25 quarterly dividend. What is Drew's total return?

10.00%. Total return includes any income the investment return produces; it is also expressed as a percentage, not dollars. The formula is as follows: ((sales proceeds - cost basis) + income) / cost basis. Using the formula here, the calculation is as follows: ((21 - 20) + (4 × .25)) / 20 = (1 + 1) / 20 = 2 / 20 = .1 (or 10%).

On March 3, the board of directors of Seabird Airlines declares a $0.20 a share dividend payable to holders of record, as of March 30. Seabird stock jumps on the news from $35 a share to $40 a share on the news. The current yield of Seabird stock is

2.00%. The formula is (quarterly dividend x 4) / current market value. (0.2 x 4) / 40 = (.8) / 40 = .02 (2%)

An investor has a long position in ABC Chemical Corp. (ABCCC), with a substantial unrealized loss. Wishing to use that loss to offset realized gains, the investor sells the stock. In reinvesting the proceeds of the sale, the investor could avoid violating the wash-sale rule by purchasing

ABCCC put options. In order to avoid violations of the wash-sale rule, investors selling a stock at a loss cannot purchase that same, or substantially identical, security within a 30-day period prior to or following the sale incurring the loss. Substantially identical would include anything that is exercisable or convertible into the same shares of stock; rights, warrants, call options, or a convertible bond. Note that when put options are exercised, the owner now has the right to sell the stock, not purchase it. Therefore buying puts in no way violates the wash-sale rule.

Which of these is correct regarding the ex-date for a common stock?

It is set by FINRA or the exchange. It is the first date an investor can purchase a security and not be entitled to the dividend.

Four of the best-known indices and averages are listed as follows. How do they rank from most to fewest issues in the index?

The Wilshire=3,800 The NYSE composite=1,900. The S&P 500= 500, The Dow Jones industrials=30.