# Fin 310

Topics: Stock market, Dividend yield, Stock Pages: 10 (2691 words) Published: April 7, 2013
Problem solutions to ch 8

LG38-1 Stock Index Performance On October 9, 2007, the Dow Jones Industrial Average
set a new high. The index closed at 14,164.53, which was up 120.80 that day. What was the return (in percent) of the stock market that day?

FV = PV × (1 + i)
14,164.53 = (14,164.53 - 120.80) × (1 + i)
i = (14,164.53 / 14,043.73) - 1 = 0.86%

LG38-2 Stock Index Performance On March 9, 2009, the Dow Jones Industrial Average reached a new low. The index closed at 6,547.05, which was down 79.89 that day. What was the return (in percent) of the stock market that day?

FV = PV × (1 + i)
6,547.05 = (6,547.05 + 79.89) × (1 + i)
i = (6,547.05 / 6,626.94) - 1 = -1.21%

LG48-3 Buying Stock with Commissions At your discount brokerage firm, it costs \$8.95 per stock trade. How much money do you need to buy 200 shares of Pfizer, Inc. (PFE), which trades at \$27.22?

(\$27.22/share × 200 shares) + \$8.95 = \$5,452.95

LG48-4 Buying Stock with Commissions At your discount brokerage firm, it costs \$9.50 per stock trade. How much money do you need to buy 300 shares of Time Warner, Inc. (TWX), which trades at \$22.62?

(\$22.62/share × 300 shares) + \$9.50 = \$6,795.50

LG48-5 Selling Stock with Commissions At your full-service brokerage firm, it costs \$120 per stock trade. How much money do you receive after selling 150 shares of Nokia Corporation (NOK), which trades at \$20.13?

(\$20.13/share × 150 shares) - \$120 = \$2,899.50

LG48-6 Selling Stock with Commissions At your full-service brokerage firm, it costs \$135 per stock trade. How much money do you receive after selling 250 shares of International Business Machines (IBM), which trades at \$96.17?

(\$96.17/share × 250 shares) - \$135 = \$23,907.50

LG48-7 Buying Stock with a Market Order You would like to buy shares of Sirius Satellite Radio (SIRI). The current ask and bid quotes are \$3.96 and \$3.93, respectively. You place a market buy-order for 500 shares that executes at these quoted prices. How much money did it cost to buy these shares?

(\$3.96/share × 500 shares) = \$1,980.00

LG48-8 Buying Stock with a Market Order You would like to buy shares of Coldwater Creek, Inc. (CWTR). The current ask and bid quotes are \$20.70 and \$20.66, respectively. You place a market buy-order for 200 shares that executes at these quoted prices. How much money did it cost to buy these shares?

(\$20.70/share × 200 shares) = \$4,140.00

LG48-9 Selling Stock with a Limit Order You would like to sell 200 shares of Xenith Bankshares (XBKS). The current ask and bid quotes are \$4.66 and \$4.62, respectively. You place a limit sell-order at \$4.65. If the trade executes, how much money do you receive from the buyer?

(\$4.65/share × 200 shares) = \$930.00

LG48-10 Selling Stock with a Limit Order You would like to sell 100 shares of Echo Global Logistics, Inc. (ECHO). The current ask and bid quotes are \$15.33 and \$15.28, respectively. You place a limit sell-order at \$15.31. If the trade executes, how much money do you receive from the buyer?

(\$15.31/share ×100 shares) = \$1,531.00

LG58-11 Value of a Preferred Stock A preferred stock from Duquesne Light Company (DQUPRA) pays \$2.10 in annual dividends. If the required return on the preferred stock is 5.4 percent, what’s the value of the stock?

Use equation 8-6, noting that for preferred stock, the growth rate g equals zero:

LG58-12 Value of a Preferred Stock A preferred stock from Hecla Mining Co. (HLPRB) pays \$3.50 in annual dividends. If the required return on the preferred stock is 6.8 percent, what is the value of the stock?

Use equation 8-6, noting that for preferred stock, the growth rate g equals zero:

LG78-13 P/E Ratio and Stock Price Ultra Petroleum (UPL) has earnings per share of \$1.56 and a P/E ratio of 32.48. What’s the stock price?

Use equation 8-10:

LG78-14 P/E Ratio and Stock Price JP Morgan Chase Co. (JPM) has earnings per share of...