Investments & Securities Chapter 1 Remaining Trades The Stock Would Greater Than The Purchase Total Fees Price

Applications

1. Large market trades, whether they are

2a. Exxon Mobile is ticker symbol XOM.

2b. The share price follows the @ symbol.

2c. 660 × $92.67 = $61,162.20

3a. Verizon Communications Inc is ticker symbol

3b. The share price follows the @ symbol.

3c. 3,320 × $38.77 = $128,716.40

4. Home Depot is ticker symbol HD.

5. 1.1K = 1.1 × 1,000 = 1,100

6. Each share of HD was traded at $29.13.

660 shares of Exxon Mobile were traded.

9. Home Depot had a $1.13 increase so the

previous days close is $29.13 – $1.13 = $28.

10c. 4,500 × $66.75 = $300,375

10d. 23,600 = 23.6K

11a. Disney is ticker symbol DIS.

11b. $34.90

11d. 7,600 = 7.6K

$34.90 + $0.98 = $35.88

13. 0.65M = 0.65 × 1,000,000 = 650,000

14. Each share of BAC traded at $36.17.

16. The trading price of Kellogg Co. was $0.04

higher than the previous day’s closing price.

17c. $34.90 + $1.08 = $35.98

18a. 36,000 = 36K

ABC 36K@37.15▲0.72

XYZ 1.24K@9.17▼1.01

$8.11 + $0.56 = $8.67

21. The day’s money flow is the average of the high,

5/15 money flow

++

⎛⎞

22. 6/6 money flow

++

⎛⎞

6/7 money flow

= $584.68 $578.32 $580 4,974,100

3

⎜⎟

⎝⎠

Lesson 1-6 Stock Transactions

Check Your Understanding (Example 1)

Check Your Understanding (Example 2)

Multiply to find the purchase price and selling price

$85.89 × 125 = $10,736.25 selling price

$10,736.25 – $8,530 = $2,206.25 gain

Extend Your Understanding (Example 2)

Check Your Understanding (Example 3)

Check Your Understanding (Example 4)

potential capital gain as a percent, expressed as a

decimal.

Applications

1. People who do research on stocks could come

to different conclusions as to what is going to

necessarily have to feel that the price is going to

go down.

2. $21.35 × 200 = $4,270 purchase price

3a. $38.64 – $34.50 = $4.14 gain

(x)($34.50) = $4.14

(x)($20,700) = $2,484

$31.27 × 200 = $6,254 selling price

$6,254 – $2,450 = $3,804 gain

7b. $3,600 0.375 100 37.5%

$9,600 =×=

10a. Capital Gain = Selling Price – Purchase price

= y – x

11. Divide the change in price by the 2003 price:

39

12a. She had a gross capital loss because y < x.

12b. Tom is correct because both formulas can be

13b. Multiply the total purchase price by 40%: 0.4gw.

13c. Add the original purchase price and the capital

14b. Multiply the price per share by the capital gain:

14c. Multiply the capital gain by the number of

shares: 1.4dx.

14d. Add the original purchase price of half the

shares to the capital gain of half the shares

14e. There was a gain, because the selling price of

the first half of the shares was 1.2dx, and the

original purchase price of all d shares was dx.

price: x > 4,093.75.

would be greater than or equal to the purchase

price minus $1,000 and less than the purchase

Lesson 1-7 Stock Transaction Fees

Check Your Understanding (Example 1)

Check Your Understanding (Example 2)

Since Jared’s portfolio value is greater than

Since the fee for one automated telephone trade is

Check Your Understanding (Example 3)

Check Your Understanding (Example 4)

Net proceeds = h – (0.01)h – (p + 40) = 0.99h – p

Applications

1. The investor and the stockbroker are each in

control of their decisions. Investors can make a

stockbroker, or make their own decisions on

which stocks to buy and sell.

2a. Since Carlos makes less than 100 trades per

year, his fees are in the first row of the table:

2d. First 100 trades: 100 × $17 = $1,700

2e. Since Carlos makes less than 100 trades per

2f. The purchase price of the stock is xy

Multiply the purchase price of the stock by the

commission rate to get the commission paid.

3b. $6,000 × $47.29 =$283,740

3c. $283,740 × 0.01 = $2,837.40

3d. $3,000 × $92.67 = $278,010

3e. $9,000 × $100.38 = $903,420

4a. Cost = 200($18.12) + $30 = $3,654

Net proceeds = $4,179 – $3,654 = $525

4b. $4,200 – $3,624 = $576

= $100

Net proceeds = $100 – $194.43 = –$94.43

5b. $110 – $192.50 = –$82.50

Laura had a capital loss.

Net proceeds = (xp–0.02xp) – (xy+20)

= 0.98xp – xy–20

8. Write an equation to solve the expression, “2%

of what number is $19.”

$300 = $20,300

Sale proceeds = $28,600 – $21 = $28,579

Sale proceeds = y – 0.0125y

Net proceeds = y – 0.0125y – (x + 0.01x) =

12. Cost = (400)$23 + (0.01)($23)(400) = $9,200

Sale proceeds = (400)($23.25) – $30 = $9,300

Net proceeds = $9,270 – $9,292 = –$22

13. $3,560.25 =

x($23.50) + (0.01)($23.50)(x)

$3,560.25 = $23.50x + $0.235x

Lesson 1-8 Stock Splits

Check Your Understanding (Example 1)

Market cap = Number of shares × Market price

Check Your Understanding (Example 2)

Set up a proportion.

Check Your Understanding (Example 3)

Check Your Understanding (Example 4)

The market cap remains the same before and after

Extend Your Understanding (Example 4)

Check Your Understanding (Example 5)

Post-split share price = b

a × Pre-split share price

3 × $62.79 = $41.86

Fractional part × Market price = 0.5 × $41.86

Applications

1. Musashi urges people to “see distant things as if

things.” In other words, be cautious because

things may not always appear to be what they

x

x = 940

2b. Since this was a 2-for-1 split, the post-split price

per share will be half the pre-split price: $69.48 ÷

3a. 3

1 200M

x

=

x = 600M

3c. $168 × 200M = $33,600M

$56 × 600M = $33,600M

x

2x = 2,250

x = 1,125

5a. 1

8 2,400

x

=

price: $2.13 × 8 = $17.04.

5c. $2.13 × 2,400 = $5,112

6a. 1

10 35,608,800

x

=

split price: $0.41 × 10 = $4.10.

6c. $0.41 × 35,608,800 = $14,599,608

7a. 1

10 200

x

=

7b. Since this was a 1-for-10 reverse split, the post-

split price per share will be ten times the pre–

split price: $2.15 × 10 = $21.50.

x

7d. $21.50 × 434M = 9.331B

8. Post-split price per share = $203.80

9a. 5

41

x

=

9b. 6

51

x

=

x

x = 2.5

2.5-for-1

x

x = 1.6

y

6 × $18 = $15

Post-split outstanding shares = 6

5 × 4,800,000 =

Fractional part × Market price = 0.5 × $22.66

12. Post-split shares = 5

4 × 325 = 406.25

13. The formula is the split ratio times the

15. The pre-split market cap formula is the pre-split

Check Your Understanding (Example 1)

Dividend income = xy

Check Your Understanding (Example 2)

Check Your Understanding (Example 3)

Check Your Understanding (Example 4)

Yesterday’s close is today’s close plus the opposite

Check Your Understanding (Example 6)

Applications

1. If a stock does not pay a dividend, you can only

— you are relying on what another person thinks

4. The quarterly dividend is the number of shares

multiplied by the annual dividend divided by four:

5. Quarterly dividend = 2,000 × $0.17 = $340

6. Multiply the quarterly dividend by 4 to get the

7. Since

y represents the quarterly dividend,

multiply by 4 to get the annual dividend, then

$33.86 (100) ≈ 1.0%.

9a. 4y

11. Preferred stockholders are entitled to assets and

earnings ahead of common stockholders.

$41.57 ≈ 1.6%;

Am Ex = $0.72 (100)

$46.15 ≈ 1.6%;

AIG =

$0.80 (100)

$34.91 ≈ 2.3%;

Cat =

$1.44 (100)

$2.60 (100)

Coca-Cola =

$57.44 ≈ 2.6%;

E! =

$1.64 (100)

$47.63 ≈ 3.4%;

13f. The dividend has not changed. The price of the

14c. Yield = $2 (100)

$61.85 = 3.2%

14f. The dividend has not changed. The price of the

stock is going down, and that decreases the

denominator of the yield formula, increasing the

yield. The corporation’s stock is falling, and that

is not good news to the investor.

16a. Since this was a 3-for-1 split, the post-split price

per share will be one-third the pre-split price:

$54.24 ÷ 3 = $18.08.

16b. 3

x

=

Assessment

Really? Really! Revisited

1. June 1: $0.01

June 6: $0.16 × 2 = $0.32

June 13: $20.482 2 × = $40.96

June 14: $40.96 × 2 = $81.92

June 15: $81.92 × 2 = $163.84

June 25: $83,886.08 × 2 = $167,772.16

June 26: $167,772.16 × 2 = $335,544.32

June 27: $335,544.32 × 2 = $671,088.64

June 28: $671,088.64 × 2 = $1,342,177.28

Applications

1a. Let 3x represent the amount invested by Nick.

Let 7x represent the amount invested by Matt.

3

x + 7x = $73,000

7x = 7($7,300) = $51,100

2. $47.65 × 1.20 = $57.18

3. Multiply the shares owned, s, by three and

divide by the total number of shares to get the

decimal equivalent owned by the top three

4. 2,000

× $25.43 = $50,860

$5.51

$33.50 = 0.1644 = 16.4%

5b. 450 × $33.50 = $15,075

5c. 450 × $39.01 = $17,554.50

7.

450 = $1.84

8.

4

y

Financial Algebra Solutions Manual Chapter 1 Page 19

day’s low.

10d. $37.86 + $0.79 = $38.65

$50.48

ITT Ed Services had a high that was

approximately 30% less than its 52-week high.

11c. Find the day where the horizontal bar on the

12a. Look at the bottom of the vertical line; about

14b. Post-split share price = 10 × $1.20 = $12

14c. Pre-split: 1,200 × $1.20 = $1,440

3

Jun 4: $27.80 $27.31 $27.54 $27.55

3

++ =

Jun 10: $27.49 $27.71 $27.89 $27.70

3

15b. Jun 6: 28.05 28.44 28.18 28.31 28.32 27.80 27.31 27.54 28.30 27.49

10

+++++++++ = $27.97

Jun 9: $28.05 $27.71

$27.97 $27.94

10 10

−+=

10 10

16a. 0.67 × 1,000 = 670

16b. $5.01

16c. 670 × $5.01 = $3,356.70

19. Since it was a y-for-p split, the value of the

p

20. Cost = $9,600 + (0.0175)($9,600) = $9,600