Economics_Ch16

# The probability of a positive return went up to 971

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Unformatted text preview: suppose we look at the S&amp;P Index during the period 1926–2004. The data here show a 70 percent likelihood of earning a positive investment return over a one-year period, but an 86.5 percent chance of a positive investment return if you held the stocks in the index over a five-year period. The probability of a positive return went up to 97.1 percent if you held the stocks for 10 years. In other words, the longer you hold stocks in the stock market, the more likely you will earn a positive return. • Ticker. In this column you see “ROK,” which is the stock or ticker symbol for Rockwell Automation Incorporated. • Div. In this column, the number, in this case “1.02,” indicates that the last annual dividend per share of stock was \$1.02. For example, a person who owned 5,000 shares of Rockwell Automation stock would have received \$1.02 per share or \$5,100 in dividends. (If this space is blank, then the company does not currently pay out dividends.) • Yield %. The yield of a stock is the dividend divided by the closing price. Yield Dividend per share/Closing price per share The closing price of the stock (shown in one of the later columns) is 47.54, or \$47.54. If we divide the dividend (\$1.02) by the closing price (\$47.54), we get a yield of 2.1 percent. A higher yield is better, all other things being the same. • P/E. The PE ratio, or price-earnings ratio, is obtained by taking the latest closing price per share and dividing it by the latest available net earnings per share. In other words, 16 (428-459) EMC Chap 16 EXHIBIT 11/18/05 16-4 9:34 AM Page 441 Reading the Stock Market Reading the Stock Market Page of a Newspaper Newspaper (1) 52W high (3) (4) (5) Stock Ticker Div 45.39 11.63 77.25 31.31 8.44 38.63 51.25 PE (2) 52 W low 19.75 3.55 55.13 16.63 1.75 18.81 27.69 ResMed Revlon A RioTinto RitchieBr RiteAid RobtHall Rockwell RMD REV RTP RBA R AD RHI ROK (6) Yield % 2.30 20.9 1.02 2.1 Vol 00s. Volume in the hundreds, or 6412 here, translates to 641,200. In ot...
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