After studying this chapter you will be able to: Read, calculate, and explain stock quotations; calculate dividends of preferred and common stocks; calculate return on investment; read, calculate, and explain bond quotations; compare bond yields to bond premiums and discounts; explain and calculate net asset and mutual fund commissions; read and explain mutual fund quotations.
STOCKS, BONDS, AND MUTUAL FUNDS McGrawHill/Irwin Chapter Twenty One Copyright © 2014 by The McGrawHill Companies, Inc. All rights reserved Learning unit objectives LU21-1: Stocks Read, calculate, and explain stock quotations Calculate dividends of preferred and common stocks; calculate return on investment LU 21-2: Bonds Read, calculate, and explain bond quotations Compare bond yields to bond premiums and discounts LU 21-3: Mutual Funds Explain and calculate net asset and mutual fund commissions Read and explain mutual fund quotations 212 Stocks Stock – Common stock – shares of ownership in a company stock that allows owners to have voting rights 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 year 213 Stocks Stockholders Dividends – payments to shareholders from profit Elect Board of Directors Elect Officers of Corporation Dividends in arrears payments owed to cumulative preferred shareholders 214 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 215 Stock Quotations in Newspapers 216 Stock Quotation Calculations Stock yield = Annual dividend per share Today’s closing price per share Earnings per share = = $1.21 = $39.09 3.1% 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 = Annual earnings per share $39.09 = 17 $2.30 217 ... quotations Compare bond yields to bond premiums and discounts LU 2 1-3 : Mutual Funds Explain and calculate net asset and mutual fund commissions Read and explain mutual fund quotations 212 Stocks Stock... objectives LU2 1-1 : Stocks Read, calculate, and explain stock quotations Calculate dividends of preferred and common stocks; calculate return on investment LU 2 1-2 : Bonds Read, calculate, and explain... 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 215 Stock