Financial Algebra 1st Edition Chapter 1 The Stock Market
Page 53 Problem 1 Answer
Given: Number of shares = x Price per share=$y
Annual dividend per share=$d
To find: The percent yield
Solution: Write the yield as a fraction.
Then convert the fraction to a decimal. Finally write the decimal as a percent.
Yield=Annual dividend per share Current price of one share
=d/y [in fraction]
=d/y×100% [in percentage]
If we bought x shares of a stock for $y per share and the annual dividend per share is $d then yield is 100 d/y%
Page 53 Problem 2 Answer
Given: For one share of Skroy Corporation:
Annual Dividend=$1.55
Today’s close=$x
Net change=+0.40
To find: The yield at yesterday’s close
Solution: First, find the closing of the
Yesterday’s close=Today’s close−Net change
=x−0.40
Yield=Dividend
Yesterday′ close
=1.55/x−0.40 [in fraction]
=1.55/x−0.40×100% [in percentage]
When one share of Skro y Corporation stock pays an annual dividend of$1.55 and today’s Skro y closed at x dollars with a net change of +0.40, then the yield at yesterday’s close will be 100×1.55/x−0.40%
Page 54 Problem 3 Answer
Given: A corporation was paying a $2.10 annual dividend. The stock underwent an a3−for−2 split
To find: The new annual dividend per share
Solution: New annual dividend per share=b/a× Pre Split annual dividend per share
=2/3×2.10
=$1.40 (rounded off to two decimals)
A corporation was paying a$2.10 annual dividend and the stock underwent a a3−for−2 split so the post-split annual dividend per share is $1.40
Page 53 Problem 4 Answer
Given: Details of bond held by Adam Principal amount(P)=$1000
Rate of interest (R)=5.7% per year i.e.0.057
To find Total interest received if the time period (T) of holding bonds is 11years.
Solution: Interest=PRT
=1000×0.057×11
=627
If Adam holds the bond from Example 6 for 11 years, he will receive $627 in total interest.
Page 55 Problem 5 Answer
It is given: I believe non-dividend stocks aren’t much more than baseball cards.
They are worth what you can convince someone to pay for them.
The analogy of non-dividend stocks and baseball cards represents the similarity of two things in which value is determined by the demand, so they can be worthless in one moment and in another very expensive.
If we talk in terms of baseball cards, their value might vary a lot.
The card of some barely known baseball player is worth very little. It has only its intrinsic value.
However, if he becomes very famous, the value of the card increases drastically.
Some card-lovers are ready to pay huge amounts just to get that particular card.
And if people buy cards for their pleasure, that is completely fine.
But, if some person buys the card, or the stock share, with the hope to sell later for a higher price, we can notice the similarity.
Gaining profit from both the investments is dependent on the random value that the buyers will decide to give.
Page 55 Problem 6 Answer
Given: Years ago, Home Depot had an annual dividend of $0.90.
If you owned 4,000 shares of Home Depot. To find how much was received annually in dividends.
We will use the formula Income dividends =Number of shares × Dividend p
Now the number of shares is given to be 4000 Dividend per share is $0.90
Hence Income dividends = Number of shares × Dividend per share
=4000×0.90
=3600
The amount that was received annually in dividends was $3,600.
Page 55 Problem 7 Answer
Given: you own r shares of a stock with an annual dividend of p dollars.
To express the amount of your quarterly dividends algebraically.
We will use the formula: Income dividends quarterly = Number of shares × Dividend per share quarterly
We have the number of shares as r.
Dividend per share annually is $p
Hence we get:
Income dividends quarterly = Number of shares × Dividend per share quarterly
=r×p/4
=rp/4
The amount of the quarterly dividends can be expressed as rp/4 dollars.
Page 55 Problem 8 Answer
Given: Mike owned 3000 shares of Merck Corporation and received a quarterly dividend check for $1140.
To find the annual dividend for one share of Merck.
We will use the formula: Annual divided per share = Income dividend annually ÷ Number of shares
Now we have the number of shares as 3000
Income dividend quarterly is $1,140
Therefore we get;
Income Dividend annually =4× Income Dividend quarterly
=4×$1,140
=$4560
and hence Annual divided per share = Income dividend annually ÷ Number of shares
=$4560÷3000
=$1.52
The annual dividend for one share of Merck was $1.52.
Page 55 Problem 9 Answer
Given: The Walt Disney Company paid a $0.35 annual dividend on a day it closed at a price of $33.86 per share.
To find the annual dividend for 500 shares.
We will use the formula Income dividends = Number of shares × Dividend per share
Now we have the number of shares as 500
Dividend per share is given to be $0.35
Therefore we get:
Income dividends = Number of shares × Dividend per share
=500×0.35
=175
The annual dividend for 500 shares was $175.
Page 55 Problem 10 Answer
It is given that :
Number of shares:500
Dividend per share annually:$0.35
Current price of per share:$33.86.
We have to find the quarterly dividend for500 shares.
We will use the fact that there are four quarters in a year, so the dividend per share annually is annually dividend per share divided by 4.
Firstly, we will find the dividend per share quarterly.
Dividend per share quarterly = Dividend per share annually /4
Dividend per share quarterly=$0.35/4
Dividend per share quarterly=$0.0875.
Now, we will find the quarterly dividend.
Income dividends quarterly = Number of shares × Dividend per share quarterly
Income dividends quarterly =500×0.0875
Income dividends quarterly =43.75.
We get $43.75.
The quarterly dividend for 500 shares was$43.75.
Page 55 Problem 11 Answer
It is given that : Number of shares:500
Dividend per share annually:$0.35
Current price of per share:$33.86.
We have to express yield as a fraction.
As, the yield is the annual divided per share divided by the current price of one share.
Therefore, Yield= Annual dividend per share
Current price of one share
Yield=0.35/33.86
Yield=35/3386.
We get the yield as a fraction:=35/3386.
Page 55 Problem 12 Answer
Number of shares:500
Dividend per share annually:$0.35
Current price of per share:$33.86.
We have to find the yield to the nearest tenth of a percent.
As, the yield is the annual divided per share divided by the current price of one share.
Therefore, Yield= Annual dividend per share
Current price of one share
Yield=0.35/33.86
Yield=35/3386
Yield≈0.010
Yield=1.0% .
The yield to the nearest tenth of a percent is 1.0%.
Page 55 Problem 13 Answer
We are given : A spreadsheet in which price per share and annual dividend are given.
The Black Oyster Corporation is going out of business. All of the corporate assets are being sold.
The money raised will be split by the stockholders.
We have to find among stockholders, the common or preferred, who receive money first.
Among the common and preferred stockholders, the preferred stockholders will receive money first, as the name “preferred” indicates that they will be preferred first than any common stockholder.
Also, preferred stockholders receive their dividends before the common stockholders and they also receive a set amount of dividends, which doesn’t vary too often, while the common stockholders will only receive dividends when the board of directions issues the dividends.
Among stockholders, the common or preferred, money will be received first by the preferred stockholders.
Page 56 Exercise 1 Answer
We are given: A table which gives the last price and the annual dividend for 15 corporations.
We have to compute the yield for each corporation and round answers to the nearest tenth of a percent.
We will be finding the yield for each corporation.
3 M Co Yield= Annual dividend per share
Current price of one share
Yield=2.00/76.90
Yield≈0.026
Yield=2.6% .
Alcoa. IncYield=0.68/41.57
Yield≈0.016
Yield=1.6% .
American Express CoYield =0.72/46.15
Yield≈0.016
Yield=1.6% .
American International Group, Inc
Yield =0.80/34.91
Yield≈0.023
Yield=2.3% .
American International Group, Inc
Yield =0.80/34.91
Yield ≈0.023
Yield =2.3%.
AT &T
Yield =1.60/39.51
Yield≈0.040
Yield=4.0% .
Bank of America Corp
Yield =2.56/33.87
Yield≈0.076
Yield=7.6% .
Boeing Co Yield =1.60/82.13
Yield ≈0.019
Yield =1.9% .
Caterpillar, Inc.
Yield =1.44/83.19
Yield≈0.017
Yield=1.7% .
Chevron Corp.
Yield =2.60/100.42
Yield≈0.026
Yield=2.6% .
Citigroup, Inc.
Yield =1.28/21.60
Yield≈0.059
Yield=5.9% .
Coca-Cola Co/The
Yield =1.52/57.44
Yield≈0.026
Yield=2.6% .
El Du Pont de Nemours & Co
Yield =1.64/47.63
Yield≈0.034
Yield=3.4% .
Exxon Mobil Corp
Yield =1.60/90.43
Yield≈0.018
Yield=1.8% .
By computing the yield for each corporation, we get :
3 M Co:2.6%
Alcoa, Inc:1.6%
American Express Co:1.6%
American International Group, Inc:2.3%
AT & T:4.0%
Bank of America Corp:7.6%
Boeing Co:1.9%
Caterpillar, Inc.:1.7%
Chevron Corp:2.6%
Citigroup, Inc.:5.9%
Coca-Cola Co/The:2.6%
El Du Pont de Nemours & Co :3.4%
Exxon Mobil Corp:1.8%.
Page 56 Exercise 2 Answer
We are given : Annual dividend per share=$1.6
Friday closing=$44
Net change=$0.35.
We have to find the yield that was on Friday and then round answers to the nearest tenth of a percent.
As, the yield is the annual divided per share divided by the current price of one share.
Therefore, yield on friday=dividend on friday price on friday
yield on friday=1.6/44
yield on friday=0.036
yield on friday=36% .
On Friday, the yield was:36%.
Page 56 Exercise 3 Answer
We are given : Annual dividend per share=$1.6
Friday closing=$44
Net change=$0.35.
We have to find the price at which Revreg closed on Thursday and round answers to the nearest tenth of a percent.
We will be using the formula: Thursday closing = Friday closing − net change.
The Thursday closing is given by : thursday closing = Friday closing − net change
thursday closing =$44−$0.35
thursday closing =$43.65.
$43.65 is the price at which Revreg closed on Thursday.
Page 56 Exercise 4 Answer
We are given: Annual dividend per share=$1.6
Friday closing=$44
Net change=$0.35.
We have to find the yield at Thursday’s close.
We will be using the formula :
Thursday closing = Friday closing − net change.
Firstly, we will find the Thursday closing.
Thursday closing = Friday closing − net change
Thursday closing =$44−$0.35
Thursday closing =$43.65.
Now, we will find the yield at Thursday’s close.
yield on Thursday =dividend on Thursday price on Thursday
yield on Thursday =1.6/43.65
yield on Thursday =0.0366
yield on Thursday =3.66%
yield on thursday =3.7% .
3.7% is the yield at Thursday’s close.
Page 56 Exercise 5 Answer
We are given : Annual dividend per share=$1.60
Friday closing=$44
Friday’s net change=$0.35
Thursday’s net change=$1.22.
We have to find the price at which Revreg closed on Wednesday and round answers to the nearest tenth of a percent.
We will be using the formula: Wednesday closing = thursday closing −thursday′s net change.
Firstly, we will find the Thursday closing.
thursday closing = Friday closing −friday′s net change
thursday closing =$44−$0.35
thursday closing =$43.65 .
We will find the Wednesday closing .
wednesday closing = thursday closing − thursday′s net change
wednesday closing =43.65−1.22
wednesday closing=42.43 .
$42.43 is the price at which Revreg closed on Wednesday.
Page 56 Exercise 6 Answer
We are given : Annual dividend per share=$1.60
Friday closing=$44
Friday’s net change=$0.35
Dividend on Wednesday=$1.60.
We have to find the yield at Wednesday’s close .
Firstly, we will find the Thursday closing .
thursday closing = Friday closing −friday′s net change
thursday closing =$44−$0.35
thursday closing =$43.65 .
We will find the Wednesday closing .
wednesday closing = thursday closing − thursday′s net change
wednesday closing =$43.65−$1.22
wednesday closing=$42.43 .
The yield at Wednesday’s close is given by :
yield on wednesday =dividend on wednesday price on wednesday yield on wednesday =1.6
42.3 yield on wednesday =0.0377
yield on wednesday =3.77%
yield on wednesday =3.8% .
3.8% was the yield at Wednesday’s close .
Page 56 Exercise 7 Answer
We are given : Annual dividend per share=$1.60
Friday closing=$44
Friday’s net change=$0.35.
By looking at the yields for Wednesday, Thursday, and Friday, we get that they are decreasing .
We have to explain why this decrease is not “bad news” to the investor who owns stock in Revreg.
The yield falls because of rising share prices, not because of falling dividends per share. Since
the dividend level has not changed, this is not “bad news” for the investor who owns shares in Revreg.
You will receive the same dividend amount regardless of the drop in performance.
And, another reason could be that the stock is a growth stock as its prices rise sharply every day.
Remember, growth stocks are bought for capital gains rather than dividends- buy low and sell high.
The decrease is not “bad news” to the investor who owns stock in Revreg because the amount of dividends did not actually decrease and there is possibly a growth stock .
Page 56 Exercise 8 Answer
We are given : Annual dividend per share=$2
Wednesday closing=$61
Net change on Wednesday=−0.85.
We have to find the yield that was on Wednesday and then round answers to the nearest tenth of a percent.
As, the yield is the annual divided per share divided by the current price of one share .
Therefore, yield on Wednesday=dividend on Wednesday
price on Wednesday
yield on Wednesday=2/61
yield on Wednesday=0.0327
yield on Wednesday=3.27%
yield on Wednesday=3.3% .
On Wednesday, the yield was :3.3%.
Page 56 Exercise 9 Answer
We are given : Annual dividend per share=$2
Wednesday closing=$61
Net change on Wednesday=−0.85.
We have to find the price at which Zeescore closed on Tuesday .
We will be using the formula :
Tuesday closing = Wednesday closing − net change.
The Tuesday closing is given by :
Tuesday closing = Wednesday closing − net change
Tuesday closing=61−(−0.85)
Tuesday closing=61+0.85
Tuesday closing=$61.85 .
$61.85 is the price at which Zeescore closed on Tuesday .
Page 56 Exercise 10 Answer
We are given : Annual dividend per share=$2
Wednesday closing=$61
Net change on Wednesday=−0.85 .
We have to find the yield that was on Tuesday and then round answers to the nearest tenth of a percent.
We will find the formula :Tuesday closing = Wednesday closing − net change.
Firstly, we will find the Tuesday closing .
Tuesday closing = Wednesday closing − net change
Tuesday closing =61−(−0.85)
Tuesday closing =61+0.85
Tuesday closing =$61.85 .
Now, we will find the yield at Tuesday’s close .
yield on Tuesday =dividend on Tuesday price on Tuesday
yield on Tuesday =2/61.85
yield on Tuesday =0.0323
yield on Tuesday=3.23%
yield on Tuesday=3.2% .
3.2% is the yield at Tuesday’s close .
Page 56 Exercise 11 Answer
We are given : Annual dividend per share=$2
Wednesday closing=$61
Net change on Wednesday=−0.85
Net change on Tuesday=−1.96.
We have to find the price at which Zeescore closed on Monday .
Firstly, we will find the Tuesday closing .
Tuesday closing = Wednesday closing − net change
Tuesday closing =61−(−0.85)
Tuesday closing =61+0.85
Tuesday closing =$61.85 .
Now, we will find the Monday closing .
Monday closing = Tuesday closing − net change
Monday closing =61.85−(−1.96)
Monday closing =61.85+1.96
Monday closing =$63.81 .
$63.81 is the price at which Zeescore closed on Monday .
Page 56 Exercise 12 Answer
We are given : Annual dividend per share=$2
Wednesday closing=$61
Net change on Wednesday=−0.85
Net change on Tuesday=−1.96.
We have to find the Monday’s yield .
We will be using the formula :Monday closing = Tuesday closing − net change.
Firstly, we will find the Tuesday closing .
Tuesday closing = Wednesday closing − net change
Tuesday closing =61−(−0.85)
Tuesday closing =61+0.85
Tuesday closing =$61.85.
We will find the Monday closing .
Monday closing = Tuesday closing − net change
Monday closing =61.85−(−1.96)
Monday closing =61.85+1.96
Monday closing =$63.81.
Now, we will find the Monday’s yield.
yield on monday = dividend on monday price on monday
yield on monday=2/63.81
yield on monday=0.0313
yield on monday=3.13%
yield on monday=3.1% .
Monday’s yield is3.1% .
Page 56 Exercise 13 Answer
We are given : Annual dividend per share=$2
Wednesday closing=$61
Net change on Wednesday=−0.85 .
By looking at the yields for Monday, Tuesday, and Wednesday we get that they are increasing.
We have explain this increase is not “good news” to the investor who owns stock in
The yield is increasing and the reason is the price decrease of the stock, not because the dividends are increasing.
As the dividends are not increasing, the yield increase is not necessarily ‘good news’ to the investor who owns Zeescore stock because he or she will still receive the same amount of dividends despite the increase in yield.
The increase is not “good news” to the investor who owns stock in Zeescore because there is no increase in the amount of dividends.
Page 56 Exercise 14 Answer
We are given : Cost of shares=$1000
Annual Interest=6.34% or 6.34/100
=0.0634.
Time(in years)=1 year.
We have to find how much will Sascha receive in annual interest.
We will find the interest after one year.
Interest= Cost of shares×Annual interest×Time
Interest=1000×0.00634×1
Interest=63.4% .
Sascha will receive 63.4% in annual interest.
Page 56 Exercise 15 Answer
We are given: Cost of shares=$1000
Annual interest=6.34% or 6.34/100
=0.0634.
Time(in years)=14 years.
We have to find how much will Sascha receive in interest if she holds the bond for 14 years.
We will find the interest after 14 years.
Interest after14 years=14× interest after 1 year
Interest after 14 years=14×63.4
Interest after 14 years=88.76%.
Sascha will receive 88.76% in interest if she holds the bond for 14 years.
Page 56 Exercise 16 Answer
We are given : Cost of shares=$1000
Annual interest=6.34% or 6.34/100
=0.0634
Price of stock=$46
Annual dividend=$2.
We have to find the yield.
We will find the yield.
yield =dividend
price of stock yield=2/46
yield=0.04347
yield=4.347%
yield=4.4% .
The yield is 4.4%.
Page 56 Exercise 17 Answer
We are given: Cost of shares=$1000
Annual Interest=6.34 %
=0.0634
Price of stock=$46
Annual dividend=$2
Time( in years)=14 years.
We have to determine which is higher, the yield on the stock or the interest rate on the bond.
Firstly, we will find the yield and then the interest.
We will find the yield.
yield =dividend price of stock
yield=2/46
yield=0.04347
yield=4.347% .
By rounding off ,we get :yield=4.4%.
We will find the interest after 14 years.
Interest after 14 years=14× interest after 1 year
Interest : =14×63.4
=88.76%.
The interest rate on the bond is higher than the yield on the stock as the interest rate is 88.76%.
Page 56 Exercise 18 Answer
We are given: Cost of shares=$1000
Annual interest=6.34% or 6.34/100
=0.0634
Time(in years)=1,14 years.
Bond matures after one year when :
Amount received=initial amount+ interest of 1year
Amount received=1000+0.0634×1000×1
Amount received=1000+63.4
Amount received=$1063.4.
Bond matures after 14 years when :
Amount received=1000+14(0.0634)(1000)
Amount received=1000+14(0.0634)
Amount received=1000+887.6
Amount received=$1887.6.
Lewis Corp. pays to Sascha when the bond matures :
After1 year :$1063.4
After14 years:$1887.6 .
Page 56 Exercise 19 Answer
We are given: Annual dividend per share=$2.46
Selling price per share=$54.24.
Selling price per share underwent a 3-for-1 split.
We have to find the new price of one share after the split.
As, we are given3−for−1split, therefore, the selling price before split will be divided by 3.
Therefore,Selling price after split = Selling price before split ÷3 Selling price after split =$54.24÷3 Selling price after split =$18.08.
The new price of one share after the split is$18.08.
Page 56 Exercise 20 Answer
We are given: Annual dividend per share=$2.46
Selling price per share=$54.24
Number of shares=100.
The number of shares underwent a 3-for-1 split.
We have to find the number of shares you own after the split.
As we are given3−for−1split, therefore, the number of shares is multiplied by 3.
Number of shares after split = Number of shares before split ×3
Number of shares after split=200×3
Number of shares after split =600.
The number of shares you own after the split is600.
Page 56 Exercise 21 Answer
We are given : Annual dividend per share=$2.46
Selling price per share=$54.24.
The annual dividend per share underwent a 3-for-1 split.
We have to find the annual dividend per share after the As, the annual dividend per share underwent a3−for−1 split, therefore, the annual dividend is divided by3.
Annual dividend after split = Annual dividend before split ÷3
Annual dividend after split =$2.46÷3
Annual dividend after split =$0.82.
The annual dividend per share after the split is$0.82.
Chapter 1 Solving Linear Equations
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- Cengage Financial Algebra 1st Edition Chapter 1 Assessment The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.1 The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.2 The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.3 The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.4 The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.5 The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.6 The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.7 The Stock Market
- Cengage Financial Algebra 1st Edition Chapter 1 Exercise 1.8 The Stock Market