Calculating Total Investment

Emma wants to buy 15 shares of a tech company. Each share costs 42 dollars. How much will she spend in total?

Identify the values: Number of shares = 15, Price per share = 42 dollars = 15 shares at 42 dollars each

Multiply shares by price: $15 \times 42 = 630$ = 630 dollars

Write the answer: Total investment = 630 dollars = Emma spends 630 dollars

Answer: Emma will spend 630 dollars to buy 15 shares.

Calculating Profit or Loss

Marcus bought 20 shares at 35 dollars each. Later, the price rose to 48 dollars per share. What is his profit?

Calculate purchase cost: $20 \times 35 = 700$ dollars = Initial investment: 700 dollars

Calculate current value: $20 \times 48 = 960$ dollars = Current value: 960 dollars

Find the difference: $960 - 700 = 260$ dollars = Profit: 260 dollars

Verify: positive = profit: 260 > 0, so this is a profit (not a loss) = Marcus gained money

Answer: Marcus made a profit of 260 dollars.

Calculating Percent Return

Sophia invested 500 dollars in stocks. After one year, her investment is worth 575 dollars. What is her percent return?

Find the gain: $575 - 500 = 75$ dollars = She gained 75 dollars

Set up percent formula: $\text{Percent Return} = \frac{\text{Gain}}{\text{Initial Investment}} \times 100$ = Formula identified

Calculate: $\frac{75}{500} \times 100 = 0.15 \times 100 = 15\%$ = 15% return

Interpret result: A 15% return means she earned 15 cents for every dollar invested = Excellent return!

Answer: Sophia earned a 15% return on her investment.

Calculating a Loss

James bought 50 shares at 28 dollars each. The stock dropped to 22 dollars per share. What is his loss in dollars and percent?

Calculate purchase cost: $50 \times 28 = 1400$ dollars = Initial investment: 1400 dollars

Calculate current value: $50 \times 22 = 1100$ dollars = Current value: 1100 dollars

Find dollar loss: $1100 - 1400 = -300$ dollars = Loss: 300 dollars

Calculate percent loss: $\frac{300}{1400} \times 100 = 21.43\%$ = 21.43% loss

Answer: James lost 300 dollars, which is a 21.43% loss.

Mistake: Confusing number of shares with total value

Why: Owning 100 shares sounds like a lot, but if each share costs 5 dollars, your total investment is only 500 dollars. Someone with 10 shares at 200 dollars each has invested 2000 dollars.

Correct: Always multiply: Total Value = Number of Shares × Price per Share

Mistake: Calculating percent return using wrong base

Why: Return should be based on your initial investment, not your final value.

Correct: Percent Return = (Gain ÷ Initial Investment) × 100, NOT (Gain ÷ Final Value) × 100

Mistake: Thinking a stock drop of 50% followed by a 50% rise means you break even

Why: If you invest 100 dollars and lose 50%, you have 50 dollars. A 50% gain on 50 dollars gives you only 75 dollars!

Correct: Percentages are always calculated on the current value, not the original. You need a 100% gain to recover from a 50% loss.

Building a Portfolio

Investors spread their money across different stocks to reduce risk. This is called diversification.

A portfolio might include: 10 shares of a tech company at 150 dollars each (1500 dollars), 25 shares of a retail company at 40 dollars each (1000 dollars), and 50 shares of a bank at 30 dollars each (1500 dollars). Total portfolio value: 4000 dollars.

Stock Market News

When news says a stock is up 5% or down 3%, this refers to the change in price from the previous day's close.

If a stock closed at 80 dollars yesterday and is up 5% today, the new price is: 80 × 1.05 = 84 dollars.

Dividends

Some companies pay dividends - regular payments to shareholders from company profits.

If a company pays a 2 dollar dividend per share and you own 100 shares, you receive: 100 × 2 = 200 dollars.

Q: How do stock prices change?

A: Stock prices change based on supply and demand. If more people want to buy a stock than sell it, the price goes up. If more people want to sell than buy, the price goes down. News, company performance, and economic conditions all affect prices.

Q: Can you lose all your money in stocks?

A: Yes, if a company goes bankrupt, its stock can become worthless and you lose your entire investment. This is why diversification is important - spreading money across many stocks reduces risk.

Q: What is the difference between a stock and a bond?

A: A stock is ownership in a company - your returns depend on the company's success. A bond is a loan to a company or government - they promise to pay you back with interest. Stocks are riskier but can grow more; bonds are safer but grow less.