Calculations
How does a stock split work?
Stock split makes buy in better so more people will buy. The ratio determines what the new stocks will be worth. Say you used a 2 to 1 ration, it would divide it’s stocks in half so that each one costs less.
What are you doing when you are using your savings to earn more money?
Investing
What is a stock?
Part ownership.
What is a bond?
What spreads the risk around?
Diversification
What is the formula for simple Interest Rate? Find the simple interest if the stock was 1500 with a rate of 5% for 23 years.
Principle * Rate * Time
$1725
A business organization that accommodates the buying and selling of securities.
Stock Exchange
What is a Dividend?
Profits from a company, given back to the shareholders.
What is a Maturity Date?
The due date that a bond becomes fully redeemable.
What ultimately determines how your investment will perform?
Risk
Using what you know about the Rule of 72, what will an investment do? How many years would you need for a 3% interest rate to do the same thing?
It will Double.
24 years
The ease with which an investment can be changed into cash without losing its value.
Liquidity
What is the Return on Investment formula?
Current Profit/ Purchase Price + Commission
Current Profit = (current price of stock - price of stock when bought) * number of stocks + (dividend * number of stocks)
What are the 2 main differences between a Corporate Bond and a Municipal Bond?
Corporate: Higher Risk, Taxed
Municipal: Lower Risk, Not Taxed
Define Face, Premium, and Discount Value.
Face: Buying bond for exact market value (buy for what it's worth)
Premium: Buying bond at higher interest rate because market is falling overall. (buy for higher than worth)
Discount: Buying bond lower than market price (buying for less than it's worth)
If Market price is 1000 with an interest rate of 7% (and only calculating after 1 year), Find the yearly interest and yield of Face, Premium, and Discount Value
- Premium has a 102% increase
- Discount has a 96% decrease
Face: 1000*.07*1 = $70 70/1000 = 7%
Premium: 1000*.07*1 = $70 70/1020 = 6.9%
Discount: 1000*.07*1 = $70 70/960 = 7.3%
A licensed specialist in the buying and selling of stocks and bonds.
Stock Broker
What are 4 main differences between Preferred Stock and Common Stock?
Preferred Stock: Less Risk, Set Dividend Rate, No Say in Company, Paid back first.
Common Stock: Higher Risk, Varying Dividend Rate, Say in Company, Paid back after Preferred Stocks.
Calculate the Tax, Net Interest, Annual Interest, and the Effective Rate of a Municipal Bond. When the investment is 10,000 and an interest rate of 7%.
10000 * .07 = 700 700/10000 = 7%
Tax = 0% Annual/Net Interest = 700 Effective Rate = 7%
What is the difference between 'Buying on Margin' and 'Short Selling'?
Buying on Margin - Borrow money to leverage the market and pay back with interest later.
Short Selling - Borrow stock to sell with hopes that it will lose value and you can buy it back at a cheaper price to return later.
Is a 5% Municipal Bond better than a Corporate Bond at 7% interest rate? Granted that both are invested with $10000 and the corporate with a tax of 23%.
No, the Municipal comes back with $500 of interest (5% overall rate) while the Corporate comes back with $539 of interest (5.39% overall rate).
What is the term that means the percent of money earned on your saving or investment over a year?
Yield
Calculate the ‘Return on Investment’ for a stock investment with the information below.
- The current price per stock is $32, you bought your 100 stocks at $25. You get a yearly dividend of 1 dollar per stock as well. The commission is $125.
32 - 25 = 7 x 100 = 700 + (1*100) = 800
800/(25*100) + 125 = 800/2625 = 30.5%
Calculate the Tax, Net Interest, Annual Interest, and the Effective Rate of a Corporate Bond. When the investment is 10,000 and an interest rate of 8%. Also with a tax rate of 28%.
10000 * .08 = 800 800 * .28 = 224 800 - 224 = 576 576/10000 = 5.76%
Tax = 28% Annual Interest = 800 Net Interest = 576 Effective Rate = 5.76%
What county office puts taxable values on real estate.
Assessor