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 •

DefinitionA 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. 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.