7.4 Stock Investing

Investing 7.4 Stock Investing Activity

Calculating Rate of Return

You just watched a video on how to calculate rate of return using a basic formula. Now, it’s time to practice. Be sure to show the formula, with values filled in, and your math work when applicable. To look up historical stock prices, you’ll use Yahoo! Finance, using the steps below:

1) Look up the stock by typing the company name into the “Quick Lookup” search engine

2) Click ‘Historical Performance” to view the past performance of the stock

www.nextgenpersonalfinance.org View all NGPF's lessons on Gooru 3) Set a “Start Date” and “End Date” for the stock to view its performance over time and calculate the Rate of Return. Follow the hints below to help you.

1 ) Complete some calculations *Express all rates of return as percentages, rounded to the nearest whole percent. 1. What’s the equation, written out as words, for rate of return? (You can refer back to the previous resource for a reminder)

2. Pretend you bought one share of Chipotle stock on Oct 25, 2011.

A. What did you pay for the share (adj. close) that day?

B. What did the share close at today?

C. What would be your rate of return if you sold your share today? (Show your work)

www.nextgenpersonalfinance.org View all NGPF's lessons on Gooru D. Suppose you sell your share today. How much money did you gain/lose with this stock? (Show your work)

3. Pretend you bought 50 shares of Chipotle stock on Oct 25, 2011.

E. What did you pay for the shares (adj. close) that day?

F. What is the closing value of the shares today?

G. What would be your rate of return if you sold your 50 shares today? (Show your work)

H. Suppose you sell your 50 shares today. How much money did you gain/lose with this stock? (Show your work)

4. Pretend you bought one share of Abercrombie & Fitch stock on Oct 25, 2011.

A. What did you pay for the share (adj. close) that day?

B. What did the share close at today?

C. What would be your rate of return if you sold your share today? (Show your work)

D. Suppose you sell your share today. How much money did you gain/lose with this stock? (Show your work)

5. Pretend you bought one share of Abercrombie & Fitch stock on Oct 25, 2011 and sold it on May 1, 2013.

E. What did you pay for the share (adj. close) that day?

F. What was the share’s adjusted closing price on May 1, 2013?

G. What would be your rate of return for that transaction? (Show your work)

H. How much money did you gain/lose with this one share? (Show your work)

Why might someone have sold their Abercrombie & Fitch share(s) on May 1, 2013?

www.nextgenpersonalfinance.org View all NGPF's lessons on Gooru 2 ) Let’s synthesize

A. What does it mean if your calculated rate of return is negative?

B. Based on the Chipotle questions: a. How does the quantity of shares you own impact your rate of return? b. How does the quantity of shares you own impact your dollar gains or losses?

C. Based on the Abercrombie & Fitch questions: a. Why might someone have kept their Abercrombie share until today instead of selling it on May 1, 2013? b. In general, what would have been the impact if you had originally bought 1000 shares of Abercrombie & Fitch instead of just 1? c. Many people invest in a variety of companies’ stocks at the same time, instead of investing in just one company. Why do you think they do this?

www.nextgenpersonalfinance.org View all NGPF's lessons on Gooru