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Fannie Mae Case Study

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Shares of Fannie Mae (FNMA) stock opened at $59.55 on January 3, 2007. This was the first trading day of that year. By January 2, 2009, the stock had imploded to the price of $0.75 per share (performance.morningstar.com, 2017). At this time, the stock still had not bottomed. This means that the stock still had quite a drop left until it finally had an upward trend in price. Similarly, Freddie Mac (FMCC) had went from $67.84 per share on January 3, 2007 to a mere $0.70 per share by the time the market opened on January 2, 2009. Keep in mind that during this timeframe, these stocks had not gone through any forward or reverse splits. Forward and reverse splits are ways companies can artificially change the stock price by increasing or decreasing the amount of its total shares with the amount of the investor’s original investment remaining the same (Frankle, 2017). Today, FNMA and FMCC are both trading around $3 per share. To emphasize how devastating this drop was, let us say that you bought 10,000 shares of FNMA at $59.55 per share, totaling $595,500. If you held onto those shares since that time you would have around $30,000 of that original $595,500 left. That’s almost a whopping -95% return on your investment after 10 years! The stock market is breaking all time highs while FNMA and FMCC performances have been lackluster for its shareholders in comparison. We will look at the reasons for this performance, compare FNMA and FMCC with other tickers to support this claim, and
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