Quick Test—Are You Ready?
For each of the following five statements, select “Yes” or “No” to indicate your behavior
regarding these investment activities.
1.
Yes
No
My investment goals are written down.
2.
Yes
No
allocation
When making investment decisions, I understand the concept of asset
3.
Yes
No
I understand how investors can profit from stock investments.
4.
Yes
No
I know how to evaluate a stock issue.
5.
Yes
No
I have enough money to begin an investment program.
Homework #5
1. Calculating Dividend Amounts. Betty and John Martinez own 220 shares of Exxon Mobil
common stock. Exxon Mobil’s quarterly dividend is $1.40 per share. What is the amount of
the dividend check that the Martinez couple will receive for this quarter?
2. Determining the Number of Shares after a Stock Split. In March, stockholders of Dress Barn
Corporation approved a two for one stock split. After the split, how many shares of Dress
Barn stock will an investor have if she or he owned 360 shares before the split?
3. Calculating Total Return. Tammy Jackson purchased 100 shares of All-American
Manufacturing Company stock at $29.50 a share. One year later, she sold the stock for $38 a
share. She paid her broker a $34 commission when she purchased the stock and a $42
commission when she sold it. During the 12 months that she owned the stock, she received
$184 in dividends. Calculate Ms. Jackson’s total return on this investment.
4. Use the Internet, the Wall Street Journal, or a local newspaper to find the following
information for the three stocks listed below.
Date __________
Internet _____ or Newspaper _____
If newspaper, which one ______________________
Stock
Microsoft
Sprint
Citigroup
Pfizer
Stock
Symbol
52-Week
High
52-Week
Low
Dividend
Dividend
Yield %
Close
Price
5. Assume you own shares in Honeywell, Inc. and that the company currently earns $2.96 per
share and pays quarterly dividend payments that total $1.00 a share each year. Calculate the
dividend payout for Honeywell? (p. 459)
6. Calculating Return on Investment. Two years ago, you purchased 100 shares of Coca-Cola
Company. Your purchase price was $41 a share, plus a total commission of $29 to purchase
the stock. During the last two years, you have received the following dividend amounts:
$1.03 per share for the first year, and $1.36 per share, the second year. Also assume that at
the end of two years, you sold your Coca-Cola stock for $60 a share plus a total commission
of $34 to sell the stock.
a. Calculate the dividend yield for your Coca Cola stock at the time you purchased it.
b. Calculate the dividend yield for your Coca-Cola stock at the time you sold it.
7. Calculating Earnings Per Share, Price-Earnings Ratio, and Book Value. As a stockholder in
Bozo Oil Company, you receive its annual report. In the financial statements, the firm has
reported assets of $9 million, liabilities of $5 million, after-tax earnings of $2 million, and
750,000 outstanding shares of common stock.
a. Calculate the earnings per share of Bozo Oil’s common stock
b. Assuming that a share of Bozo Oil’s common stock has a market value of $40, what is
the firm’s price-earnings ratio?
c. Calculate the book value of a share of Bozo Oil’s common stock
8. Using Dollar Cost Averaging. For four years, Mary Nations invested $3,000 each year in
America Bank stock. In 2004, the stock was selling for $34. In 2005, the stock was selling for
$48. In 2006, the stock was selling for $37. In 2007, the stock was selling for $52.
a. What is Ms. Nations’s total investment in America Bank?
b. After four years, how many shares does Ms. Nations own?
c. What is the average cost per share of Ms. Nations’s investment?
$1,413.60 - $90 commission = $1,323.60 total profit after commissions (pp. 471-472)