UGBA M3L9 - UGBA M3L9 Reader Iceland and berming Dividends...

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UGBA M3L9 Reader Iceland and berming Dividends and rating agencies Present value formula with three iterations Valuing Common Stocks The daily battle between greed and fear Long-run valuation of future cash flows Price/Earnings ratio handles different stock prices, different earnings Diversification Unique risk versus Market risk Portfolios Common Stock A fraction of ownership in a company You can buy and sell at any time Company never expects to pay you back the original money Company _may_ give dividends (a small payment—part of the profits—typically once a year Common Stocks are Risky But, over long periods of time they give a better return than “fixed instruments” (i.e. bonds)- company bankrupt get nothing back Their rising prices reflect the growing economy Company that is growing by 2% is not greate Why do people invest in common stock? Definition Return “Return” is how much you earn from an investment; Example: Put $100 in a Money Market account paying 1.7 % interest. In one year you will receive $101.70: your ” $100 + $1.70 interest Your return is 1.7 percent Definition Appreciation Buy a baseball signed by Barry Bonds for $200 Sell it one year later for $250, you have made a “return” of $50 on your $200 investment, due to appreciation Total Return = dividend + appreciation Savings and bonds pay “interest”, stocks pay dividends How are stocks doing? Stock Index An indicator of general market sentiment calculated by adding up stock prices and dividing by a constant Dow Jones is 30 “representative” stocks
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Russell 3000 is an index made of almost all actively traded stocks Just like your GPA Many types of Stock Index General market indicators Just like your GPA in “business classes”
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UGBA M3L9 - UGBA M3L9 Reader Iceland and berming Dividends...

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