stock 2.2

Question 1

Stocks

Answer 1

equity ( represents partial ownership of the company)
Long term source of funds
No maturity

Question 2

Common stocks

Answer 2

• Voting rights, election of board of directors
• Right to dividends ( company distributes part of the earning as dividends)

Question 3

Preferred stocks

Answer 3

• the Same equity interest
• Pay fixed dividents
• No voting rights (they appear only if company stops paying dividents)
• Hybrid security ( ownership of the company + fixed dividents)
• Pref stocks owners getting paid before common stocks owners

Question 4

Stock return

Answer 4

• capital gain (when u sell stock)
• Dividents

Question 5

Earnings are divided in two

Answer 5

• Retained earnings
• Dividens

Question 6

Stocks price

Answer 6

value of the firm/ number of shares

Question 7

Calculating the Return on Stocks

Answer 7

(Selling price - Purchase price) + Dividend
Return = ——————————————————-
Purchase price

Question 8

Calculating the Return on Stocks

Answer 8

After-tax capital gain + After-tax dividend – Commissions
R = ————————————————————————–
Purchase price

Question 9

Calculating the Return on Stocks

Answer 9

Capital gain = 110-100 = 10 baht
Net capital gain (after tax) = 10-(0.1510) = 8.5
Net dividend (after tax) = 5 – (0.25) = 4
Commissions = 0.01100 + 0.01110 = 1+1.1=2.1

R (Rate of return) = (8.5+4-2.1) / 100 = 10.4/100 = 0.104 = 10.4%

(Note that the 100 in the formula above is the initial investment – the purchase price of the stock.