705 Words3 Pages

Tyquan Bazemore
Personal Financial Planning
Professor: Rodney Jean-Baptiste Week Four Problem Sets
1.Determining Profit or Loss from an Investment. Three years ago, you purchased 150 shares of IBM stock for $88 a share. Today, you sold your IBM stock for $103 a share. For this problem, ignore commissions that would be charged to buy and sell your IBM shares.
a. What is the amount of profit you earned on each share of IBM stock?
$16
b. What is the total amount of profit for your IBM investment?
$2400
2.Calculating Earnings Per Share, Price-Earnings Ratio, and Book Value. As a stockholder in Bozo Oil Company, you receive its annual report. In the financial statements, the firm has reported assets of $9*…show more content…*

a. What is the annual dollar amount of interest that you will receive from your bond investment? $1,000 9.5 percent = $95 annual dollar amount of interest b. Assuming that comparable bonds are paying 8 percent, what is the approximate dollar price for which you could sell your bond? $95 annual interest ÷ 8 percent = $1,187.50 approximate market value c. In your own words, explain why your bond increased or decreased in value. This bond increased in value because you owned a bond with a fixed interest rate of 9.5 percent interest during a time period when interest rates in the economy were declining. 5. Using Margin. Bill Campbell invested $4,000 and borrowed $4,000 to purchase shares in Wal-Mart. At the time of investment, Wal-Mart was selling for $45 a share. a. If Bill paid $30 commission, how many shares could Bill buy if he used only his own money and did not use margin? Bill could purchase 88 shares. b. If Bill paid $50 commission, how many shares could Bill buy if he used his $4,000 and borrowed $4,000 on margin to buy Wal-Mart stock? Bill could purchase 176 shares with margin. c. Assuming that Bill did use margin, paid $90 commission to sell his stock, and sold his Wal-Mart stock for $53, how much profit did he make on his Wal-Mart investment? Proceeds of sale 176 x$53= 9328 cost 176 x 45 7920 Less Return of margin 4000 less margin 4000 Less commission 50 plus commission 45 Net proceeds of sale 5328 net cost of stock

a. What is the annual dollar amount of interest that you will receive from your bond investment? $1,000 9.5 percent = $95 annual dollar amount of interest b. Assuming that comparable bonds are paying 8 percent, what is the approximate dollar price for which you could sell your bond? $95 annual interest ÷ 8 percent = $1,187.50 approximate market value c. In your own words, explain why your bond increased or decreased in value. This bond increased in value because you owned a bond with a fixed interest rate of 9.5 percent interest during a time period when interest rates in the economy were declining. 5. Using Margin. Bill Campbell invested $4,000 and borrowed $4,000 to purchase shares in Wal-Mart. At the time of investment, Wal-Mart was selling for $45 a share. a. If Bill paid $30 commission, how many shares could Bill buy if he used only his own money and did not use margin? Bill could purchase 88 shares. b. If Bill paid $50 commission, how many shares could Bill buy if he used his $4,000 and borrowed $4,000 on margin to buy Wal-Mart stock? Bill could purchase 176 shares with margin. c. Assuming that Bill did use margin, paid $90 commission to sell his stock, and sold his Wal-Mart stock for $53, how much profit did he make on his Wal-Mart investment? Proceeds of sale 176 x$53= 9328 cost 176 x 45 7920 Less Return of margin 4000 less margin 4000 Less commission 50 plus commission 45 Net proceeds of sale 5328 net cost of stock

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