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Answer Sheet for Stock Market Lessons Names_________________________________________ USE THIS FORM TO ANSWER THE QUESTIONS FOR EACH OF THE LESSONS. I WILL ONLY ACCEPT THIS ANSWER SHEET WITH THE ANSWERS TYPED IN (I WIIL NOT GRADE ANY HAND WRITTEN ANSWERS) AND THE LESSONS IN ORDER. Lesson 2 How Do You Find Stock Symbols? Company Name Agilent Apple Computer McDonald’s Pixel Coca-Cola Disney Gillette Tricon Adobe Symbol A aapl MCD PXLW COKE DIS G TY ADBE Market US US US US US US US US US Industry: software Company Name #1 burst.com Inc #2 Calico Commerce Inc #3 CorVu Corp Industry: Communications Services Company Name #1 Arch Wireless Inc #2 Talk America holdings #3 WilTel Communications Inc Industry: Biotechnology & Drugs Company Name #1 Chattem Inc #2 Fountain Pharmaceuticals Inc #3 Integrated Health Technologies Inc Industry: Casinos & Gaming Symbol BRST.OB CLIC.OB CRVU.OB Symbol AWIN.OB TALKD WTELV.OB Symbol CHTT FPHI.OB IHTC.OB Company Name #1 Boyd Gaming Corp #2 JCC HLDG CO #3 Trans World Corp Industry: Computer Network Company Name #1 Creative Computer Applications Inc #2 Intergraph Corp #3 LanVision Systems Inc Symbol BYD JCHC.OB TWCP.OB Symbol CAP INGR LANV Use Yahoo! Finance http://finance.yahoo.com/ under World Finance to find the following stock symbols by country. Country Company Name Australia News Corp Australia Telstra Corp Canada Dominion Bank Canada Kasten Chase Applied Research France PEUGEOT Germany VOLKSWAGEN China QINGDAO SODA Hong Kong HONGKONG.COM Japan Sony (6758) Mexico TLEVISA CPO Singapore DBS LAND LTD United Kingdom British Telecom PLC United Kingdom Cable and Wireless PLC United Kingdom British Aerospace PLC Symbol NOP pa TLS TD KCA.TO 12150.PA 466400.BE 600229.SS 8006.HK 6758 TLEVISAAc.MX DBL.SG BTge.L CW.L N/a Lesson 3 How Do You Read Stock Quotes Online? 1. What is the name of the stock exchange on which Intel is presently trading now? NASDAQ_______________________________ 2. How much would students have to pay for one share of Intel if they bought the stock for the stock game at this moment? $17.91 ______ 3. What was yesterday’s closing price for Intel? $17.30_____________ 4. How many shares of Intel were traded since the market was open this morning? 57,271,596 ___________________________ 5. How many shares of Intel are traded daily on average? ___64,615,954___ 6. How much did Intel earn per share in the last year? $12.29_________ 7. The price-earning ratio (P/E) of the stock market is presently at 28. How many times is Intel’s P/E above the market? _2.06_____________ 8. Does Intel pay a dividend? _______Yes_______ 9. If students bought 10 shares of Intel at the lowest price of the year and sold it at the highest price for the year, how much money would they make?___________238.30__________________________ 10. If students bought 100 shares of Intel at the current price but missed the chance to buy the shares at the lowest price for the day, how much more money would they have to pay? _____$1506_________________ 11. What is Intel’s market cap? _____119.0B___________ Additional Activities: Look at a 5-year chart below the stock table from Yahoo! Finance. 1. How many times has Intel had a stock split during the last 5 years? ________________3times___________________________ 2. If students bought 100 shares of Intel in 1995, how many shares would they have now? Click on the "vs. S&P 500" link on the bottom right hand corner of the chart. _______1600___________________ 3. Intel and the S&P index were at the same value in January 1996. How many percent did Intel outperform the market (S&P) at the current share price? _____________It didn’t__________________ 4. Is Intel’s current price above or below its 50-day moving average? 200-day moving average? __________Below, Below_____________ Note: If the share price is above the 50-day or 200-day moving average, investors will expect the price to go even higher due to upward momentum. The opposite is true if the price is below the moving averages. Click on “Profile” in the stock table and answer the following questions: 1. What is Intel’s main business? _____________Semi-conductor chips_____ 2. What were Intel’s top line (revenues) and bottom line (net income) growth 3. 4. 5. 6. in the recent financial reporting period? _$6,504,000,000___$686,000,000 Is Intel a strong growth company? Why? _yes, they are constantly Increasing their profits and going up in the stock market.____________ Who is the president, CEO, of Intel? ____________Craig Barrett________ What was the closing price for Intel 3 months ago (click on historical data)? ___________$16.67_______________________________________ How many percent of shares do insiders (management and directors) own? _7%______________________ 4 How Do You Profit From Trading Stocks? 1. How did the performance of the sample portfolio compare with the three benchmarks? _It was a lot lower. 2. ___________________________________ 3. Which type of investment had the most gains during this period? _It seemed to be chance and high risk ones. ____________________ 4. One of the strategies of managing risks in investing is through diversification. By comparing investments in the sample portfolio with the S&P 500 benchmarks, can you tell why diversification is a good strategy? ____________It allows a person to have different area’s of growth instead of just all tech or all Government o all entertainment they have a wide variety of all of them_______________________ 5 How Do You Double Your Money? Rule of 72 2. Ask students to complete the columns below: How many years will it take John to double his money if he invests in a Treasury bond? ____ years 1 Beginning Amount ($) 100 Rate of Return (%) 6 Amount Earned ($) 6 Ending Amount ($) 106 2 106 6 6 112 3 112 7 7 119 Year 4 119 7 7 126 5 126 8 8 134 6 134 8 8 142 7 8 9 10 11 142 150 159 169 179 9 9 10 10 11 9 9 10 10 11 150 159 169 179 190 12 190 11 11 200 Ask students to observe a pattern. 3. From the previous example, students should predict the outcome of the columns below. How long will it take John to double his money? Rate of Return (%) Number of Years 12 6 6 12 24 3 24 3 4 10 8 18 7.2 9 4. How accurate is the rule of 72? Ask students to complete the columns below with the help of the StocksQuest Calculator. Click here to use the Calculator. Like any general rule, the rule of 72 is just an approximation. For exact calculations, students can go directly to the Calculator section. Rate of Return (%) Rule of 72 1 2 3 4 5 6 7 72.00 36.08 24.00 18.00 14.40 12.00 10.29 Actual (from Calculator) 72 36 24 18 14.4 12 10.29 8 9 10 15 20 30 40 50 100 9.00 8.00 7.20 4.80 3.60 2.40 1.80 1.44 0.72 9 8 7.2 4.8 3.6 2.4 1.8 1.44 1.00* * 38% error Additional Activities: 1. The reverse of the rule of 72 can tell students how many years before their money is worth only half of its original value. Let’s say inflation is at 4% per year. A dollar today will be worth only $0.50 in 18 years since 72 / 4 = 18. How many years will it take to lose half of the purchasing power? Complete the columns below: Inflation Rate (%) Number of Years 4 3 3 10 5 10.29 18 24 24 7.2 14.4 7 8 What is A Stock Screener? 1. One of the investing strategies is to select high growth small-cap companies. To find small-cap stocks from the screener, students should select the “Market Cap” for under $500 million and keep all other variables in the “Any” position. Now, complete the table below to narrow the selections. For % Growth use Est. 1 Yr EPS, for % price increase use Performance (1 Yr Stock Perf:) Small-cap companies selection criteria Industry 1. Any 2. Software 3. Software P/E ratio Any Any Max. 30 %Growth +50 +50 +50 % Price Increase +50 +50 +50 # Of Results .4629 . 348 . 41 2. Another strategy is to go with the Wall Street professionals. To find stocks that analysts are presently strongly recommending, students should set “Analyst Recommendation” to the “1” position. Now, complete the table below to narrow the selections. Analyst recommendations selection criteria Industry 1. Any 2. Software 3. Software P/E ratio Any Any Max. 30 %Growth + 50 +50 +50 % Price Increase # Of Results Any Any +50 18 2. . 10 3. One strategy of investing is called “bottom fishing.” To find stocks that performed poorly in the past year, students should select “One Year Stock Price Performance” to “Decrease greater than 50%” and keep all other variables in the “Any” position. Now, complete the table below to narrow the selections. One Year Stock Price Performance selection criteria Industry 1. Any 2. Any 3. Any P/E ratio Any Max. 5 Max. 5 %Growth Any Any +50 % Price Increase Decrease 50 Decrease 50 Decrease 50 # Of Results . 49 .5 . 11 4. Another strategy is to find winners in a given industry. To find stocks that have a leading position in an industry, students should complete the table below. Industry criteria Industry 1. Biotechnology 2. Biotechnology 3. Biotechnology P/E ratio Any Any Max 50 %Growth Any +50 +50 % Price Increase Any Any Any # Of Results . 453 . 17 . 13 9 What are the Indices of Investing? 1. Go to Yahoo! Finance http://finance.yahoo.com/ to get detailed quotes for SPY and select the 1-year big chart. Then, click on "vs. S&P 500", meaning the comparison chart with the U.S. overall stock market measured by the broad S&P 500 index. Does the SPY match closely with the S&P 500 index on the chart? _____________________yes._________________________________ 2. On the same Web page, enter DIA and click the Get Quotes button. Can students tell if the Dow performed better or worse than the S&P 500 index in the past year?_________________yes, better_________________________ 3. Enter QQQ and click the Get Quotes button again. Can students tell if the Nasdaq 100 performed better or worse than the S&P 500 index in the past year?____________________yes, worse_____________________ 4. Repeat the similar procedures for the sector indices, XLE, XLF, XLK, and HHH._____better.better,worse,worse____________________________ 5. Repeat the similar procedures for the WEBS, EWJ and EWU.___N/a,better,better________________________________________ Now, students should get a feel of how those indices shown in the above table performed compared with the overall U. S. stock market. If they are not interested in reading charts and calculating percentages, students may get started with the Global Stock Game (GSG). Make sure they purchase at least one share of SPY, QQQ, or DIA as benchmarks for their stock portfolio. As an on-going monitoring effort in their stock portfolio, students can compare how well their investments are doing in comparison with these indices. If students are investing in the Japanese or U. K. market, they may use EWJ or EWK as their benchmarks. Also, students can choose these indices as their primary investments for the GSG. For students who are interested in math, they can complete the following table by reading charts and calculating data from the above 1,2,3,4, and 5 activities. Indexes Name Symbol One-year gain* (%) Spiders, S&P 500 SPY . Diamonds, Dow 30 DIA . Nasdaq-100 QQQ . Energy Select Spider XLE . Financial Select Spider XLF . Technology Select Spider XLK . Internet Holders HHH . WEBS-Japan EWJ . WEBS-U.K. EWU . *(Right vertical reading – left vertical reading) x 100% Left vertical reading 11 What is the Dow? 1. . Matching: The Dow 30 represents a cross-section of major U.S. industries. Complete the following table that divides these 30 companies into different industry groups. Match the number of companies with the different groups. For example, there are only four companies in the technology sector and two in the telecommunications sector. Students may use this link and click on profiles to help in this matching. Industry Technology . . . . Company Name Company Name 1 Intel 3 HP . . 2 Microsoft 4 united tech. . . 1 AT&T . . 2 SBC . . 1 American express 2 citigroup 3 Alcoa . . . . 1 caterpillar 3 GMC 5 MM&M 7 Merck 9 Dupont 11 Kodak . . 2 Exxon 4 JPmorgan 6 Boeing 8 Honeywell 10 IBM . . . Consumer products/services . . . . . . Boeing Co. Caterpillar Inc. Coca-Cola Co. DuPont Co. Eastman Kodak Co. General Electric Co. General Motors Corp. Home Depot Inc. Honeywell International Inc. Hewlett-Packard Co. Manufacturing/heavy industry . . . . . . . . AT & T Corp. Exxon Mobil Corp. Financial Services . . . . American Express Co. Citigroup Inc. Telecommunications . . . The Dow Alcoa Inc. 1 GE 2 McDonalds 3 Procter & gamble 4 wal-mart 5 Walt Disney 6 Philip Morris 8 Johnson & 7Int paper co. Johnson 9 coke 10 Home Depot . . International Business Machines Corp. Intel Corp. International Paper Co. J.P. Morgan & Co. Johnson & Johnson McDonald's Corp. Merck & Co. Microsoft Corp. Minnesota Mining & Manufacturing Co. Philip Morris Cos. Procter & Gamble Co. SBC Communications Inc. United Technologies Corp. Wal-Mart Stores Inc. Walt Disney Co. 2. 2. The Dow has been up and down around 10,000 in most of 1999 and 2000 while the Nasdaq, powered by the technology stocks, doubled to pass 5,000. What is the ratio of the Dow and Nasdaq now? (The ratio of the Dow and Nasdaq used to be 4 to 1) 2-1 3. 3. Traditionally, all the Dow stocks are traded in the New York Stock Exchange, NYSE. In November 1999, the Dow added two Nasdaq stocks to reflect the change from the old to the new economy. Can students name those two companies?________SBC, Microsoft_______________ 4. 4. The Dow committee is planning to make substitutions again in the components to reflect the changing economy. Students should nominate three stocks to the Dow membership. Also, name three companies that should be replaced by the substitutions. IBM, AT&T, Kodak replace GE JP Morgan and Merck 5. 5. The Standard and Poors 500 (S&P 500) index is often used as a benchmark to gauge the gains and losses of the stock market. Compare the gains or losses of the Dow with the S&P 500 benchmarks for the past one year. (Hint: the stock symbol for the Dow is DIA. If students need help, they can go back to Lesson 7 “What are the Indices of Investing?”) 6. 6. One strategy is commonly known as “Dogs of the Dow,” meaning buying the Dow companies with the highest dividend yields. Students should buy the Dow laggards at a low price and sell them after they rebound. Now, they should find the top five “Dogs of the Dow” stocks with the highest dividend yields. Students can find dividend yields by using this link and clicking on profiles. Company name 1 Alcola 2 Gen. Electric 3 johnson&johnson 4 american express 5 Gen. motors Symbol . AA GE . JNJ . AXP . GM Dividend Yield . 2.51% . 2.76% . 1.48% . 0.85% . 5.37% 7. What does a great or bad day in the stock market feel like? Use the Dow’s home page to complete the following tables. The five worst days of the Dow (Also know as a market crash) Date 1 2 Point Loss . . % Loss . . 3 4 5 . . . . . . The five biggest percent gains in the Dow Date 1 2 3 4 5 % Gain . . . . . 14 How Do You Analyze a Corporation? Calculate key financial ratios: 1. Price-to-earnings ratio (P/E) P/E = Share Price / Earnings Per Share (from annual report) Get a stock quote for Intel (INTC) from the home page of this Web site. Click on this link to get the EPS for Intel. Then, calculate the P/E for Intel. Note: The higher the P/E, the more expensive the share price. P/Es for the S&P 500 range from 20 to 30. 2. Net Profit Margin Margin = Net Income / Revenue Click here to get Intel’s data and calculate Intel’s profit margin. Note: The higher the profit margin, the better. Not many companies have a margin over 20%, but Microsoft and Intel are two exceptions. 3. Return on Equity (ROE) ROE = Net Income / Shareholder’s Equity Click here to get Intel’s shareholder’s equity. Click here to get Intel’s net income. Then, calculate the ROE for Intel. Note: The higher the ROE, the better. An ROE over 20 indicates a strong competitive position in the business. 4. Debt to Equity Ratio (D/E) D/E = Long-term Debt / Shareholder’s Equity Long-term debt means the amount borrowed by the company that will be paid back in a time period over one year. Click here to get the long-term debt and the shareholder’s equity for Intel. Calculate the D/E for Intel. Note: A D/E of 25% or less is considered safe while above 50% means the company has been borrowing too much money and runs a risk of not meeting loan payments.