Stocks

Question 1

How do you trade stocks on an exchange

Answer 1

• Secondary market

Question 2

Market Capitalisation

Answer 2

share price * number of shares outstanding

Question 3

P/E Ratio

Answer 3

• Price / earnings ratio

Question 4

P/B Ratio

Answer 4

• Price : book ratio

Question 5

Holding Period Returns

Answer 5

• HPR = P1-Po/Po + D1/Po

Question 6

Stock valuation

Answer 6

• Comparables
• > comparing ratios between companies (Pe PB DP etc)
• > only as useful as values themselves, think level headed
• DCF or DDM
• > PVo= D1/(1+r) + D2/(1+r)^2 etc

Question 7

Constant dividends

Answer 7

• Perpetuity

- annuity

Question 8

Growing dividends

Answer 8

D2=(1+g)D1

D3=(1+g)D2 = (1+G)^2 D1