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$1000ABC Bond
2017 6%
$30
$30
$30
$30
$30
$30
$30
$30
$30
Current Yield = Annual income YTM = _____________ YTC = ______________ Price
Settlement Corps + Munis T+3 30/360Gov + Options T+1 actual/actualCash Same dayReg T T+ 5
Starter Cheat Sheet
I P Y
Settlement Date Last Coupon Date
Time Period ofAccrued Interest
A c c r u a l Fo r m u l a
Formulas
AcronymsM emory points
1 pt = $10
P N C Y Y = ( P rice Nominal C Y YTM YTC)
Corps + Munis = 1/8 Gov = 1/32
2
25% Reg TMaintenance
CMVL
50% Reg TRestricted
CMV30% Reg T
Maintenance
CMVs
Low Coupon * High Coupon
Short Maturity Long Maturity *
Discount * PremiumSmall Discount Large Discount *
Small Premium Large Premium *
Bond Volatility
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$ Capital $
Capital = Money Capitalization = raising money Corporations publicly raise capital
two ways: Take on more owners (sell stock) Not required to repay investment or
dividends
Take on debt (sell bonds) Must repay investment and pay interest Earnings = profits
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Common Stock Part owner of Corporation Entitled to part of
distributed profits Last in line
Dividend payment Company dissolution
BC
Common Stock
$1.00 Par value
Investment Vehicles
___________
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Common Stock Selling stock = selling ownership in the company Limited liability Stock ownership entitles an investor to a:
Certificate of ownership (a stock certificate) Right to any distributed profits
Distributed profits = Dividends Corporations dont always distribute $
Not a right to dividends/earnings Who decides? T.Q. Shareholders cant vote for div
______________________________
Inspect company books records Annual report card
Right to vote Preemptive right to maintain proportional ownership position
StockCertificate
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Common Stock Stock = equity = ownership
If it has stock in the name... Incorporation requires common stock
Privately held or sold to public Taxed on the number of shares authorized Transferability - you can sell it to someone
else __________Shares authorized in the
corporate charter
Corp must file state charter specifyinginitial number of shares
Issued Shares authorized stock sold at least once
StockCertificate
100 sharesStarbucks
Corp
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Common Stock Outstanding Shares issued stock
currently in the hands of the public ____________Stock stock which
has been bought back by thecorporation
No dividends
No voting rights
Still considered issued but notoutstanding
Not included in computation ofEPS
StockCertificate
100 sharesStarbucks
Corp
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Common Stock Pricing Car prices vary by make and model
Least expensive vehicle? Most expensive vehicle? Price is driven by supply and demand Current Market Value = CMV
Stock prices vary by company Least expensive stock?
Penny stocks - 5, 25 Most expensive stock?
Berkshire Hathaway about $100,000 per share Par value is an arbitrary value
BC
Common Stock
$1.00 Par value
Growth
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Stock Bid/Ask Prices
Customer will ________ stock from the brokeragefirm at the Ask price ( retail )
Customers will _________ their stock to the brokerage firm at the BID price ( wholesale )
Subject quote Subject of further checking Its about 16-16.5, Its quoted at 16-16.5
Firm quote A Broker/Dealers actual price It is 17.25-18.50 B/D must honor this price for 1 st 100
shares (round lot)
Bid $12.85
Ask $13.50 Spread = $.65
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Voting Rights100 shares = 100 votes
Position 1 Position 2 Position 3 Bill / Bob Mike / Mary John / Jane
100 votes 100 votes 100 votes
Statutory voting
100 votes per position
0 votes 0 votes 300 votes
______________voting
300 votes any way youchoose T.Q. favors the smallshareholder
Proxies for absentee voting
Stock splits Issuance of new stock Convertible bonds Mergers
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Stock Splits and Stock DividendsTotalChange #Shares Pr ice Value
Originally 100 $60 $6,000
2:1 Split (2/1) 200 (1/2) $30 $6,0003:1 Split (3/1) 300 (1/3) $20 $6,000
3:2 Split (3/2) 150 (2/3) $40 $6,000
20% StockDividend 120 $50 $6,000
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Part owner of the corporation
Preferred treatment Dividend payment Company dissolution
$100
ABC Preferred Stock
6%
_________$100
Annual rate based on par value$6 stated if no par value is given
6% of $100 = $6/year
Preferred Stock
Income
Usually give up voting rights
Entitled to part of distributed profits
If common gets a dividend...
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Preferred Stock$100
StraightPreferred
Stock
5%
No back payments
$100 CumulativePreferred
Stock
4%
Back payments
3% first round, up to anylevel allowed by BOD
$100 Participating
Preferred Stock
3% and up
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Cumulative Preferred Stock
= $4 per year
Dividends are paid quarterly orsemi annually
$1.00 per quarter Paid before common gets anything
Entitled to Back payments or payment in arrears
$100 CumulativePreferred
Stock
4%
1st quarter $ 1.002nd quarter $ .753rd quarter ---------4th quarter
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Current Yield (CY) = annual income/price
Tells an investor what they are making on their $
$100
ABC PreferredStock
6%
Preferred Stock
CMV $115
$6/$115 = .052 = 5.2%
Income $6/year
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Investment Banking
Public investors
Starbucks
$10,000,000 for expansion
1 million shares common stock
Investment Bankers
Misnamed, not really bankers
No loans or other banking functions
Help issuers raise capital (stock, bonds)
AKA Sponsor, Underwriter, Distributor
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Common Stock Authorized 1,000,000 shares
Initial Primary offering (IPO) 600,000 shares 1st time a company sells stock Considered issued and outstanding
Primary offering 100,000 shares 2nd, 3rd, 49th time a company sells stock
Total shares outstanding 700,000 shares
Primary offering means the issuer is getting the $
Secondary offering (large blocks of stock) Sold by one or more wealthy investors Issuer is usually not getting the $
StockCertificate
100 sharesPen Corp
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Prospectus - the new Car brochure Only new car buyers get a new car brochure Prospectus
Issuers are required to produce and give to investors before they invest Must include Material facts
Any fact an investor should know before purchasing Litigation, significant events, facts
No highlighting, underlining info Issuers include GM, Starbucks, investment companies
Primary Market Prospectus only required on a primary (new car) offering When an investor buys a security from an issuer
Secondary Market No prospectus required on secondary transactions When investors buy /sell to each other
SEC requirement No approval or SEC disclaimer statement on cover or first page
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Special Securities
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American Depository Receipts (ADRs)
Facilitates overseas trading of _ Banks in U.S. and foreign countries Trading of foreign company stock on U.S.
exchanges e.g. NYSE Trade with U.S. dollars Dividends paid in U.S. dollars
After foreign tax with holding No voting rights No preemptive rights
ADR
100 sharesNokia Corp
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Breyers Ice CreamCMV $5.00/box
Breyers Ice CreamCoupon $2.50
Starbucks Stock
CMV $35.00/share
__________term _________Share holders onlyPreemptive rightProportional ownership can be
diluted if not exercisedSubscription Price _________ market price
No voting / Dividend rights
Starbucks StockRight
Subscription price$31.00/share
Rights vs Warrants
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Rights vs Warrants
Breyers Ice CreamCMV $5.00/box
Breyers Ice CreamCoupon $15.00
Starbucks StockCMV $35.00/share
Starbucks StockWarrant
Subscription price$42.00/share
__________ termAnyone can buySubscription Price
_________ market price
No voting / Dividend rightsSweetener w/bondsDetachable
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Preemptive Right
Cum With Rights. Before Ex-Rights DateValue = M S
N+1Ex-Rights Without rights. After Ex-Rights Date
Value = M SN
M = Market Price e.g $34S = Subscription Price e.g $31N = Number of Rights required to buy one sharee.g.10 rights to buy each share
Preemptive Rights Formula for determining theoretical value of a
right
$ = /right
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Stock Capitalization Capitalization = # shares
outstanding x current market price
E.g.50,000,000 shares x $25 per sharemarket price = $1.25 Billion
______ Cap (Capitalization)
$300 million -$2 Billion ____________growth Hi risk/hi reward Small relatively unknown
companies
Papa Johns $564 Million
Linens and Things $766 Million
PetsMart $742 Million
Revlon $131 Million
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CapitalizationMid Cap
$2 - 10 Billion Moderate growth Medium risk/reward Medium sized companies
PepsiCo $83 Billion
Coca Cola $124 Billion
Microsoft $309 Billion
General Electric $390 Billion
Target Stores $28 Billion
Wal-Mart $236 Billion
Toys R Us $3.9 Billion
Williams Sonoma $3.98 Billion
Barnes and Noble $2.4 Billion
Wendys $3 Billion
___________Cap
Above $10 Billion ______growth Low risk/reward Large, well known companies
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Dow Jones Industrial Average (DJIA)AT&TAmerican ExpressBoeing CompanyCaterpillarChevronCisco
Coca ColaDuPontExxon MobilGeneral ElectricGoldman SachsHome Depot3MIntelIBM
Johnson & JohnsonJ.P. Morgan/ChaseMcDonalds MerckMicrosoft
NikePfizer IncProcter & GambleTravelersUnited HealthcareUnited TechnologiesVerizonVisaWal-Mart StoresWalt Disney Company
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Stock Indices Dow Jones
Composite 65 Industrials 30 Transportation 20 Utilities 15
Standard & Poor's 500 (400 are industrials, moston NYSE, some on AMEX and Nasdaq)
Standard & Poor's 100
Russell 2,000- Benchmark for ___________ stocks Wilshire 5,000- Approximately 5,000 stocks
(includes NYSE, AMEX and OTC)
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Dividend Distributions for Stocks 1 Declaration date - the day the company declares the dividend2 Ex -dividend date - day the stock trades without the dividend
Two days before the record date Stock price _________ by the amount of the dividend
3 R ecord date - the date on which ownership changes4 P ayment Date - Date the check is mailed5 Must settle by close of business on record date to get dividend
Septxxxxxxxx
xxxxxxxxxxxxxxxx
Novxxxxxxxx
xxxxxxxxxxxxxxxx
OctS M T W T F S
1 2 3 4 5 6
7 8 9 10 11 12 1314 15 16 17 18 19 2020 22 23 24 25 26 2728 29 30 31
D
REx
P
CMVBid Ask
$13.21 $14.00
Price on Ex date$12.71 - $13.50
50
DER P
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Share Price After Stock Dividend Just prior to ex-date CMV = $48
20% stock dividend declaration Assume
100 shares prior to dividend Total value of holding dividend
100 x $48 = $4800 total value 100 shares x 20% = 20 additional share
New total after dividend 120 shares $4800/120 shares = $40 New share price! Total value of holding dividend
120 x $40 = $4800 total value