Business 12th Edition by William Pride,Robert Hughes,Jack Kapoor

Exercise 4

BUILDING TEAM SKILLS
Investing in stocks can be a way to beat inflation and accumulate money. Traditionally, stocks have earned just below 10 percent per year since 1926. Bonds and certificates of deposit, on the other hand, often earn little more than the inflation rate, making it very difficult to accumulate enough money for retirement.
Assignment
1. Form teams of three people. The teams will compete against each other, striving for the largest gain in investments.
2. Assume that you are buying stock in three companies; some should be listed on the NYSE, and some should be traded in the Nasdaq over-the-counter market.
a. Research different investments, and narrow your choices to three different stocks.
b. Divide your total investment of $25,000 into three amounts.
c. Determine the number of shares of stock you can purchase in each company by dividing the budgeted amount by the price of the stock. Allow enough money to pay for the commission. To find the cost of the stock, multiply the number of shares you are going to purchase by the closing price of the stock.
d. Assume that the commission is 1 percent. Calculate it by multiplying the cost of the stock by 0.01. Add the dollar amount of commission to the cost of the stock to determine the total purchase price.
3. Set up a table to reflect the following information:
a. Name of the company
b. Closing price per share
c. Number of shares purchased
d. Amount of the commission
e. Cost of the stock
4. Record the closing price of the stock on a weekly basis. Prepare a chart to use for this step.
5. Before the end of the semester, assume that you sell the stock.
a. Take the closing price on the day you sell your stocks and multiply it by the number of shares; then calculate the commission at 1 percent.
b. Deduct the amount of commission from the selling price of the stock. This is the total return on your investment.
6. Calculate your profit or loss. Subtract the total purchase price of the stock from the total return. If the total return is less than the total purchase price, you have a loss.
7. Prepare a report summarizing the results of the project. Include the table and individual stock charts, as well as a statement describing what you learned about investing in stocks.