Stock Market Practice Problems Vocabulary stock Definition A

Stock Market Practice Problems

Vocabulary • • stock • Definition A stock is a certificate of ownership that can be purchased, sold, and traded. • dividend • Definition A dividend is a portion of corporation’s earnings that is distributed to its shareholders. broker • Definition A broker is an individual that facilitates the purchase or sale of assets associated with investments.

Reading the Stock Quotations • Handout Number One • Review Worksheet and Answers

Question One • Say you own 5, 715 shares of Sanden Research Labs, each of which pays a yearly dividend of $14. 66. How much do you receive in dividends every year? • • • a. $83, 781. 90 b. $81, 729. 50 c. $75, 865. 50 d. $93, 954. 60 Answer: Letter A

Question Two • Geoffrey’s portfolio includes 4, 462 shares of United Rotators, which earns him $43, 772. 22 annually. What is the yearly dividend on each share of United Rotators? • • a. $9. 61 b. $8. 95 c. $10. 19 d. $9. 81 • Answer: Letter D

Question 3 • Prince Waste Collection pays a yearly dividend of $14. 94 per share of stock. If Prince Waste Collection pays Kathy $46, 926. 54 in dividends every year, how many shares does Kathy own? • • a. 2, 978 b. 3, 141 c. 3, 443 d. 2, 934 • Answer Letter B

Question Four • June’s portfolio includes 177 shares of Parchar Special Effects, 213 shares of Giaco Household Goods, and 152 shares of Raxin Accounting. If Parchar Special Effects pays a yearly dividend of $8. 21 per share, Giaco Household Goods pays $6. 97 per share, and Raxin Accounting pays $11. 44 per share, how much does June earn in dividends per year? a. • $4, 449. 82 • b. • $4, 676. 66 • c. • $3, 777. 74 • d. • $6, 200. 48 • Answer: Letter B

Question 5 • Liz owns stock in Nar Heating/Cooling and Cilla Shipping. She owns 120 more shares of Cilla Shipping than she does of Nar Heating/Cooling pays a yearly dividend of $5. 78 per share, and Cilla Shipping pays a yearly dividend of $4. 15 per share. If Liz receives $1630. 02 in dividends annually, how many shares of Nar Heating/Cooling does she own? • • • a. 196 shares b. 114 shares c. 348 shares d. 282 shares Answer: letter B

The short and the long of it… • Long Position- strategy to buy and hold to realize a gain over a period of time, price of stock increases and investor sells to “take a profit” (bull market) • Short Position- strategy used when expectations are that a stock price will decline. Investor is expecting the price of the stock to fall to realize a gain (bear market)

Example • Car – 100 to 50 • Stock

Closure • What happens when you “short a stock” and the price goes up. – The owner of the stock will ask for the stock back and you are going to have to come up with the money to make up the difference.