Deck 19: Futures Markets

Question 1

Stock of XYZ Corp. is listed daily in the financial press. Three columns of the listing for XYZ on a recent day are shown in the following:
a. What was the dosing price of XYZ on this day?
b. What are the earnings per share of XYZ for the past 12 months?

Answer 1

The closing price of the stock can be calculated by using the formula given below: a.
The closing stock price is calculated as shown below: b.
Earnings per share are the ratio of total earnings to the number of shares.
The formula for calculating the earnings per share is given below: Where, PE is price earnings ratio and MPS is market price.
The earnings per share are calculated below:

Question 2

The current stock price of the Turtle Computer Company is $20 per share. A year ago the price of the stock was $30. During the past 12 months the stock has paid dividends of $2.00 per share from earnings of $4.00 per share.
a. What is the current dividend yield?
b. What is the current P-E ratio?

Answer 2

The dividend yield is expressed in percentage terms shows the dividend per unit price of share.
The current stock price of TC Company is $20 per share. The dividend paid per share is $2.
a.
The dividend yield can be calculated by using the formula given below: The dividend yield for TC Company can be calculated as shown below: Therefore, the dividend yield is 10%.
b.
PE ratio is the price earnings ratio.
The formula for calculating the PE ratio is given below: The PE ratio for the TC Company can be calculated as shown below: Therefore, the PE ratio is 5.

Question 3

The price of a Treasury bond is listed as 119:8. How much would an investor have to pay for this bond?

Answer 3

Bonds are the financial instruments issued by the firms to borrow money from public.
The listed price of the Treasury bond is 119:8. The price that investor likes to pay for this bond can be calculated as shown below: This amount should be paid if the bond is quoted without coupon, but if the bond is quoted with coupon, then accrued interest should be paid.

Question 4

How is the Dow Jones Industrial Average calculated?

Question 5

How much interest per year (in dollars) would the holder of a typical bond with the following characteristics receive?

Question 6

The issuer of a bond makes two fundamental promises to the buyer of a bond. What are they?

Question 7

What are the advantages of owning a stock mutual fund as opposed to directly owning stock?

Question 8

What are the three factors that influence the market price of a bond at a particular time?

Question 9

How is the net asset value of a mutual fund calculated?