Kinh tế học - Chapter 21: Stocks, bonds, and mutual funds

Chapter 21Stocks, Bonds, and Mutual FundsRead and explain stock quotationsCalculate dividends of preferred and common stocks; calculate return on investmentStocks, Bonds, and Mutual Funds#21Learning Unit ObjectivesStocksLU21.1Read and explain bond quotationsCompare bond yields to bond premiums and discountsStocks, Bonds, and Mutual Funds#21Learning Unit ObjectivesBondsLU21.2Explain and calculate net asset and mutual fund commissionsRead and explain mutual fund quotationsStocks, Bonds, and Mutual Funds#21Learning Unit ObjectivesMutual FundsLU21.3Cumulative preferred stock - entitles its owners to a specific amount of dividends in 1 yearStock - Shares of ownership in a companyCommon Stock - Stock that allows owners to have voting rightsStocksPreferred Stock - Does not allow voting rights, but gives preference over common stockholders in dividendsStocksDividends - Payments to shareholders from profitDividends in arrears - Payments owed to cumulative preferred shareholdersStockholdersElectBoard of DirectorsElectOfficers of CorporationHow Stocks Are TradedStockbrokers - people who buy and sell stock on the floor of the exchanges. They charge a commission for trading stocks.Stock exchanges - An orderly trading place for stock.Stock Quotations in Newspaper’s52 weeks YLD VOL NETHI LO STOCK (SYM) DIV % PE 100s CLOSE CHG40.49 17.27 General Electric (GE) 1.24 6.8 8.73 75,537 18.34 1.59PE Ratio = Closing price per share of stock = $18.34 = 8.73 Annual earnings per share $2.10Earnings per share = Annual earnings . Total number of shares outstandingStock Quotation CalculationsStock yield = Annual dividend per share = $1.24 = 6.8% Today’s closing price per share $18.34*Earnings Per Share are not listed on the stock quoteDividends on Preferred and Common StockThe stock records of Jason Corporation show the following :Preferred stock issued: 20,000 shares. In 2011, Jason paid no dividendsPreferred stock cumulative at $.80 per share. In 2012, Jason paid $512,000 in Common stock issued: 400,000 shares dividends. 2011Dividends paid 0Preferred stockholders Paid: 0 Owe: 20,000 x $.80 = $16,000Common Stockholders 0 2012Dividends paid $512,000Paid for 2011 16,000Paid for 2010 16,000 32,000Total dividend 512,000Paid preferred for ‘11 & ’12 -32,000Common Stockholders $480,000 $480,000 = $1.20 per share400,000 sharesReturn on InvestmentSuppose you bought 200 shares of General Electric stock at $18.34 and sold them 1 year later at $22.10 With a 1% commission rate buying and selling the stock and a current $124 dividend per share in effect what was your return on investment?Bought200 shares at $18.34 = $3,668.00Commission at 1% = 36.68Total cost $3,704.68Sold200 shares at $22.10 = $4,420Commission at 1% = - 44.20Total cost $4372.80Total receipt $4,375.80Total cost -3,704.68Net Gain $671.12Dividends + 248.00 (200 x $.1.24)Total Gain $919.12$919.12$3,704.6824.81% Return on InvestmentBond Quotations in Newspaper’s Current Net Bonds Yield Vol. Close changeCoke 5.6514 5.7 6 99.59 -1 Yearly Interest = Face value of bond x stated yearly interest rate $56.50 = $1,000 x .0565*Bonds are stated as a percent of face amountBond Quotations in Newspaper’s Current Net Bonds Yield Vol. Close changeCoke 5.6514 5.7 6 99.59 -1 Yearly interest: = $56.50 = (.0565 x $1,000) = 5.69% = 5.7%Cost of bond: $995.90 (.9959 x $1,000)Calculating Bond YieldsBond yield = Total annual interest of bond Total current cost of bond at closingJim Smith bought 5 bonds of Coke at the closing price of 99.59. What is Jim’s interest? (Remember that in dollars 99.59 is $995.90) $282.50 = 5.7% $ 4979.505 x $995.905 bonds x $56.50 interest per bond per yearWhy Investors Choose Mutual FundsDiversificationLiquidityLow fund expensesAccess to foreign marketsProfessional managementNet Asset ValueNAV = Current market value of fund’s investment - Current liabilities Number of shares outstandingNet Asset Value (NAV) - the dollar value of one mutual fund shareMutual Fund - A portfolio of stocks and/or bondsCommissions: Mutual FundsClassification Commission charge Offer price to buyNo-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 Mutual Fund Quotations in Newspaper’s FUND YTDNAME NAV CHG % RET Grln P 9.72 0.24 4.1Name of FundNAV plus the sales commissionChanges in NAV versus the previous dayFund return this year