Chapter 3 Security Types. Classifying Securities Interest-Bearing Assets Equities Derivatives Options Summary and Conclusions. Classifying Securities. Interest-Bearing Assets. Money market instruments Basic features Examples T-bills Commercial paper.
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You found the following stock quote for DRK Enterprises, Inc., in the financial pages of today’s newspaper. What was the closing price for this stock that appeared in yesterday’s paper? How many round lots of stock were traded yesterday?
Yesterday’s Papers’ Closing Price:
Yld % = Div. / Closing Price
4.6% = 3.60 / Closing Price
Closing Price (today’s paper) = 3.60 / .046 = 78.26 = $78¼
Yesterday’s = $78¼ + 3/8 = $78
Volume in 100s is 7295, so 7295 round lots or 729,500
shares were traded.
In the previous problem, assume the company has five
million shares of stock outstanding. What was the
net income for the most recent four quarters?
P/E = Price / EPS = 16 and stock price = 78 ¼, so
16 = 78.25 / EPS
EPS = 78.25/ 16 = $4.89
so with 5 million shares outstanding,
Net Income = $4.89 x 5M = $24,450,000
Suppose the following bond quote for ISU Corporation
appears in the financial pages of today’s newspaper.
If this bond has a face value of $1,000, what closing
price appeared in yesterday’s newspaper?
Interest = 7-7/8 = 7.875%
Interest payment = 7.875% x $1,000 = $78.75 annually
Current Yield = 8.7% = Interest payment / Bond price
8.7% = $78.75 / Bond price
Bond price = $78.75 / 8.7% = $905.17,
but prices are quoted as percent of par value, so
Yesterday’s price = 90.517 - 0.5 = 90.017
So yesterday’s price is $900.17
In the previous problem, in what year does the bond
mature? If you currently own 25 of these bonds, how
much money will you receive on the next coupon
The bond matures in 2011 (from the 11 after the “s”)
Interest payment = $78.75 / 2 = $39.375 every six months
So 25 bonds will pay:
$39.375 x 25 = $984.38