The Stock Market Game

Assignment:

1. Update your portfolio value and fill in the new table.
2. Discuss the performance of your stock.
3. List the news articles you have been collecting throughout the quarter and discuss their importance to performance of your stock.

I. Update your portfolio value.

A. The current value of your portfolio is composed of two parts: the current value of the stock you purchased plus the value of any dividends issued while you owned the stock.
If a stock split occurred while you owned the stock, it would affect both the number of shares you own and the share price. This happens infrequently, however. Read about stock splits at http://www.sec.gov/answers/stocksplit.htm . Even though this article claims the value of your shares won’t change if there’s a split, this isn’t quite true. Even though you will be issued equivalent shares, the market will react to the news of the split, which never happens without a reason.

1. Find the current price of the stock and multiply it by the number of shares you now own. This is the current value of the stock.

2. Search on the company site, msn.com, or other financial news service for dividends declared for your company or stock splits. A dividend is a payment a company makes to shareholders, who are the owners of the company. A dividend is declared by the company’s Board of Directors. A certain amount is paid per share of stock owned. Dividends are declared for owners as of a certain date. For example, Microsoft declared a dividend of $.08 per share for all shareholders of record on November 17, 2005. The dividend will be paid on December 8, 2005. So even though I will not have the money in my hand when I determine the value of my portfolio, I will include it because I will be paid that money shortly.

3. Companies may also issue dividends in the form of additional shares of stock. This would increase you number of shares.

4. Fill out the chart below—I have added a couple of columns. The first line is the information you collected when you purchased the stock. The second line will summarize the changes to your portfolio since then. In this example:

§ The current price of Microsoft is 27.97 per share. My number of shares has not changed. The value of my stock is 386.97 X 27.97 = $10,823.55.

§ Microsoft’s dividend of $.08 per share will pay me $.08 X 386.97 = $30.96.

§ The total value of my portfolio is $10,823.55 + $30.96 = $10,854.51

§ The total return of my portfolio is the increase in value (not the total value) divided by my original investment.

Return = increase / original investment

§ My portfolio increased in value by $854.51 (Current value – original value), so the yield is $854.51/$10,000 = 8.5%. In other words, I earned 8.5% on my original investment of $10,000 over about two months. Not bad!
Date Company Symbol Price No. of Shares Stock Value Dividend per share Dividend Value Portfolio
Value Total Return on Original
Investment
9/21 Microsoft MSFT 25.84 386.97 10,000
11/22 27.97 386.97 10,823.55 .08 30.96 10,854.51 8.5%

II. Discuss your portfolio’s performance in one or two narrative paragraphs
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