Personal Finance Name: ______Chapter 9 CHAPTER 9 REVIEW SHEET

Complete the following with the use of your notes and textbook. REVIEW YOUR VOCAB TERMS!!

1. Explain why corporations prefer to issue common to raise funds for their operations.

2. Explain how cumulative preferred and convertible offer advantages to .

3. Describe why a small-cap stock is more likely to be a rather than an income stock.

4. Identify the advantages and disadvantages of a stock advisory service to evaluate a stock.

5. Describe why the price-earnings ratio is a good measure of a stock .

6. List the differences among market order, limit order, and stop order.

Personal Finance Name: ______Chapter 9

7. Identify the tax advantages of -term investment strategies.

FINANCIAL MATH PROBLEMS

8. Carly recently received 50 shares of preferred stock. She would like to figure out the actual dollar amount of the , which is a percentage of the of the stock. According to the stock the par value of each share is $30 and the dividend rate is 4%. What is the total dollar amount that Carly should receive each year?

9. Suppose that you purchase stock in Starbucks. Assume that Starbucks pays an annual dividend of $1.64 and is currently selling for $50.89 a share. What would your current be?

10. In 2010 you bought 60 shares of Apple, Inc. for $316.87 a share. The stock pays an annual dividend of $1.85. You are going to sell the stock at the current price of $589.53 a share. What would be the total return on this investment?

11. Verizon Communications Inc. had a net earnings of $925,000 last year. Verizon had 250,000 outstanding shares of . What were Verizon’s earnings per share?

12. Verizon’s stock is selling for $43.30 a share. Using Verizon’s earnings per share from #11, what is Verizon’s price-earnings ratio?

Personal Finance Name: ______Chapter 9 EXTRA CHAPTER 9 REVIEW QUESTIONS

 Investors have a choice of securities, which are all . Name two types of securities.  What is a major reason why people decide to invest?  This is a type of company that issues stock to a small group of people. These are not traded openly in stock markets.  Explain what it means to be a shareholder.  Describe a public corporation and give an example of a public corporation.  Why do corporations issue common stock?  The you make from selling stock is the difference between ______and ______.  This occurs when the shares of stock owned by existing shareholders are divided into a larger number of shares. This can increase your profits.  This type of stock gives the owner the advantage of receiving before common stockholders receive any cash dividends in the event that the company is struggling financially.  This is the assigned dollar value that is printed on a stock certificate. Unlike the market value of a particular stock, this does not change. ______ Preferred Stock is stock whose unpaid dividends build up and must be paid before any cash dividend is paid to the common stockholders.  If a company decides to omit dividend payments to preferred stockholders, people who hold this stock receive those dividend payments during a later payment period.  What is convertible preferred stock?  This type of stock pays higher-than-average dividends compared to other stock issues.  Describe cyclical stock.  This type of stock is considered a safe investment because it is issued by the strongest, most respected companies such as Kellogg or General Electric.  Stock from a corporation that has issued a large number of shares of stock and has a large amount of capitalization.  The value of this stock varies anywhere from less than $1 to $10 and can be viewed as unsteady since it's probable that they are issued by newer companies.  Name two Internet websites where you can find information on stocks.  What is the difference between a bear and a bull market?  Determine the current yield of an investment that pays an annual dividend of $1.84 and is currently selling for $53.48 a share.  This calculation measures the amount of corporate profit assigned to each share of common stock.  This is the market in which investors purchase new security issues.  This occurs when a company sells stock to the general public for the first time. "Going Public".  This is considered a high-risk investment because these are usually used to finance new corporate growth.  One of the largest securities exchanges in the world, more than 3,000 corporations with a total market value of about $16 trillion.  This is the network of dealers who buy and sell the stocks of corporations not listed on a securities exchange.  Describe what an account executive/ does for you as an .  What is a portfolio?  Describe a market order.  What is a limit order?  Describe the long-term investment technique .  Name at least one -term investment technique.