Investments, tenth edition

  Stock Market Listings 

  Figure 2.8  presents key trading data for a small sample of stocks traded on the New York 

Stock Exchange. The NYSE is one of several markets in which investors may buy or sell 

shares of stock. We will examine these markets in detail in Chapter 3. 

 To interpret  Figure 2.8 , consider the highlighted listing for General Electric. The table 

provides the ticker symbol (GE), the closing price of the stock ($19.72), and its change 

( 1 $.13) from the previous trading day. About 45.3 million shares of GE traded on this 

day. The listing also provides the highest and lowest price at which GE has traded in the 

last 52 weeks. The .68 value in the Dividend column means that the last quarterly divi-

dend payment was $.17 per share, which is consistent with annual dividend payments of 

$.17  3  4  5  $.68. This corresponds to an annual dividend yield (i.e., annual dividend per 

dollar paid for the stock) of .68/19.72  5  .0345, or 3.45%. 

 The dividend yield is only part of the return on a stock investment. It ignores prospective 

 capital gains  (i.e., price increases) or losses. Low-dividend firms presumably offer greater 

prospects for capital gains, or investors would not be willing to hold these stocks in their port-

folios. If you scan  Figure 2.8 , you will see that dividend yields vary widely across companies.  

     a.   If you buy 100 shares of IBM stock, to what 

are you entitled?  

    b.   What is the most money you can make on 

this investment over the next year?  

    c.   If you pay $180 per share, what is the most 

money you could lose over the year?   

 CONCEPT CHECK 

2.3 

bod61671_ch02_028-058.indd   42

bod61671_ch02_028-058.indd   42

6/18/13   7:41 PM

6/18/13   7:41 PM

Final PDF to printer

---

  C H A P T E R  

2

  Asset Classes and Financial Instruments 

43

 The P/E ratio, or    price–earnings  ratio,      is the ratio of the current stock price to last 

year’s earnings per share. The P/E ratio tells us how much stock purchasers must pay per 

dollar of earnings that the firm generates. For GE, the ratio of price to earnings is 16.01. 

The P/E ratio also varies widely across firms. Where the dividend yield and P/E ratio are 

not reported in  Figure 2.8 , the firms have zero dividends, or zero or negative earnings. We 

shall have much to say about P/E ratios in Chapter 18. Finally, we see that GE’s stock price 

has increased by 10.11% since the beginning of the year.