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 Chapter Twenty One Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 Read, calculate, and explain stock quotations. Calculate dividends of preferred and common stocks; calculate return on investment. LU21-1: Stocks Learning unit objectives LU 21-2: Bonds 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. LU 21-3: Mutual Funds 2 21- Cumulative preferred stock – entitles its owners to a specific amount of dividends in 1 year Stock – shares of ownership in a company Common stock – stock that allows owners to have voting rights Stocks Preferred stock – does not allow voting rights, but gives preference over common stockholders in dividends 3 Stocks Dividends – payments to shareholders from profit Dividends in arrears - payments owed to cumulative preferred shareholders | STOCKS, BONDS, AND MUTUAL FUNDS Chapter Twenty One Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 Read, calculate, and explain stock quotations. Calculate dividends of preferred and common stocks; calculate return on investment. LU21-1: Stocks Learning unit objectives LU 21-2: Bonds 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. LU 21-3: Mutual Funds 2 21- Cumulative preferred stock – entitles its owners to a specific amount of dividends in 1 year Stock – shares of ownership in a company Common stock – stock that allows owners to have voting rights Stocks Preferred stock – does not allow voting rights, but gives preference over common stockholders in dividends 3 Stocks Dividends – payments to shareholders from profit Dividends in arrears - payments owed to cumulative preferred shareholders Stockholders Elect Board of Directors Elect Officers of Corporation 4 How Stocks Are Traded? Stockbrokers – 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 5 Stock Quotations in Newspapers 6 Closing price per share of stock Annual earnings per share Earnings per share = Annual earnings Total number of shares outstanding Stock Quotation Calculations Annual dividend per share $ Today’s closing price per share $ *Earnings per share are not listed on the stock quote. Stock yield = = = PE Ratio = $ $ = 17 = 7 Dividends on Preferred and Common Stock The stock records of Jason Corporation show the following: Preferred stock issued: 20,000 shares. In 2014, Jason paid no dividends. Preferred stock cumulative at $.80 per share. In 2015, Jason paid $512,000 in dividends. Common stock issued: 400,000 shares. 2014 Dividends paid 0 Preferred stockholders Paid: 0 Owe:
