Module 8 - Stock Exchange Indicators

Question 1

Bid price

Answer 1

price that buyers are willing to pay

Question 2

Offer price

Answer 2

Price that sellers are willing to sell at

Question 3

Mid Price

Answer 3

average of buying and selling price at the end of the previous trading day

Question 4

Earnings per share

Answer 4

Profits attributable to ordinary shareholders / number of shares in issue

Question 5

P/E ratio

Answer 5

market price per share / earnings per share

or

market capitalisation / earnings attributable to ordinary shareholders

Question 6

What does the P/E ratio indivate

Answer 6

the multiple of current earnings per share which investors are prepared to pay for a share

Question 7

Dividend cover

Answer 7

profits attributable to OS / dividends paid

Question 8

Dividend yield

Answer 8

Dividend per share/ share price

Question 9

Why can dividend yield not be compared with interest from a bank

Answer 9

It ignores any capital gains so doesn’t show the total return

Question 10

Flat yield

Answer 10

Coupon / Market price x 100%

Question 11

Redemption yield of stock

Answer 11

Use IRR

Question 12

Undated stocks interest yield

Answer 12

Equates to the redemption yield - interest is paid in perpetuity

Question 13

FTSE 100 index

Answer 13

100 largest companies - blue chip securities

Excluded if do not have sufficient liquidity

prices taken from SETS

Question 14

FTSE 250

Answer 14

Next largest 250 companies

‘mid-caps’

Question 15

FTSE 350

Answer 15

FTSE 250 + FTSE 100

Question 16

FTSE 350 Supersectors

Answer 16

18 indices made up of 350 grouped by industry

Question 17

FTSE Fledgling

Answer 17

If too small for All-Share, no liquidity requirements, not updated as regularlu

Question 18

Calculating an index

Answer 18

1. choose index starting value
2. index divisor = total market capitalisation / index starting value
3. market capitalisation / index divisor