2. What is the Bid price of the stock? Bid Price – represents the highest amount that an investor is currently willing to pay to acquire a board lot of shares or a particular bond.

3. What is a board lot? The number of shares included in a single transaction as determined by a particular stock exchange. On the TSE board lots are defined as follows:

4. Board lot continued…

5. What is the ask price? Represents the lowest amount that an investor is currently willing to accept (sell) for a board lot of shares or a particular bond. Represents the lowest amount that an investor is currently willing to accept (sell) for a board lot of shares or a particular bond.

6. For a transaction to occur either the buyer must increase his/her bid price to the ask price, or conversely the seller must drop his/her ask price to the bid price. Otherwise, there is no sale.

7. In the real world, most orders to buy and sell stock are market orders (execute transaction immediately at the prevailing market price). Therefore, a buyer submitting a market order to buy would pay the current ask price, and the seller submitting a market order to sell would receive the current bid price.

8. P/E Ratio P/E = Market price per share/ EPS where EPS = Net income for year – pref. dividends --------------------------------------------- --------------------------------------------- # shares of common stock outstand # shares of common stock outstand

9. P/E Ratio… The ratio allows investors to compare one stock investment to another in the context of how many dollars must be expended (price) to acquire one dollar’s worth of the firm’s earnings. Growth stocks usually have very high P/E ratios (50:1 or >) whereas “blue-chip” stocks generally have ratios in the range of 5:1 - 20:1.

10. Yield The yield figure in the newspaper compares the yearly dividends in the past twelve months to the stock’s closing price. The yield figure in the newspaper compares the yearly dividends in the past twelve months to the stock’s closing price. Ex. Algoma CentraDividends - $1.00 Closing price$52.00 Stock yield = $1.00/$52.00 = 1.92% (before tax) = 1.92% (before tax)

11. Rough Bond Yields Yield = Annual Interest/ Bond + Annual capital gain/bond ------------------------------------------------------------- ------------------------------------------------------------- Purchase Price / Bond Where: Annual Interest = Coupon Rate * Face Value Annual CG = Value @ Mat – purchase price ------------------------------------- ------------------------------------- # years to final maturity

12. Rough Bond Yields… Assumes that the investor will hold the bond until the date of final maturity. Assumes that the investor will hold the bond until the date of final maturity. Allows one to calculate the actual amount of one’s capital gain or loss that would be realized in relation to the price at which the investor acquired the bond. Allows one to calculate the actual amount of one’s capital gain or loss that would be realized in relation to the price at which the investor acquired the bond.

13. Expanded Formula

14. Bond’s coupon rate never varies throughout the entire life of the bond, but the price will vary in response to interest rate fluctuations in the economy. Bond’s coupon rate never varies throughout the entire life of the bond, but the price will vary in response to interest rate fluctuations in the economy.