Understanding the Mathematics of Personal Finance

# SHORT SALES

So far, this chapter presumed that the way to make money is to “buy low, sell high.” This is true, but it isn’t the only way to make money. Buying a stock in the hope that its price will rise is called “going long.” Conversely, if you think a stock’s price will fall, you can “go short” or “sell short.” The way to do this is to arrange to borrow some stock that is selling at, say, \$25 a share, and selling it. When the price falls to \$20 a share you buy back the stock, return the shares and any costs for the loan, and keep the difference. If the stock price goes up instead of down, you’ll have to pay more than you received when you sold the stock, and you’ll lose money on the transaction.

13.4 STOCK DIVIDENDS

Corporations may declare dividends. A dividend is a portion of the company’s profits that are returned to the shareholders, the amount being calculated on a per-share- owned basis. Examining the dividend policy and history of a company is useful, especially when looking at very nonvolatile companies, in trying to predict the value of the company’s stock. For example, if a stock is selling at \$10 a share and the company has historically never missed a \$0.10 per share quarterly dividend, then you could earn a 4% return on your money just for holding the stock for a year when the stock price doesn’t budge.

13.5 BONDS

A stock represents a part of a company owned by the stock purchaser. A bond, on the other hand, is a loan. A corporate bond is an “IOU“ for money loaned to a corporation; a government bond is money loaned to the government. Various governmental bodies (federal, county, city) issue bonds. Because government bonds are considered to be very secure, they usually offer a lower interest rate than do corporate bonds.

The resale value of a bond depends on the interest rate the bond pays and the interest rates available elsewhere. If I have a bond that will repay \$100 on its matu­ration date 1 year from today that is paying 5% annual interest, then I should be able to sell the bond today for the present value of the \$100 repayment plus the present value of the year’s interest.

Calculating the present value of course requires the assumption of an available interest rate. If that rate is very low, then the value of my bond today goes up. Conversely, if the available interest rate is very high, then the present value of moneys due to me a year from today goes down, and my bond value goes down with it.

Just as you can invest in mutual funds for stocks, you can invest in bond funds.

Добавить комментарий

## Understanding the Mathematics of Personal Finance

### PAYING OFF A LOAN VERY SLOWLY

This section uses a little math, but I’ll go through it slowly in small steps. As with the previous section, this section is not necessary if you don’t want to …

### Taxation and Inflation

John Lennon once said, “Life is what happens to you while you’re busy making other plans.” Both taxation and inflation, it seems, are parts of life—they happen to you while …

### PARI-MUTUEL BETTING

The pari-mutuel machine system used at race tracks offers a different approach to gambling. A roulette wheel owner is never sure what his or her daily operating cost will be; …

## Как с нами связаться:

Украина:
г.Александрия
тел./факс +38 05235  77193 Бухгалтерия
+38 050 512 11 94 — гл. инженер-менеджер (продажи всего оборудования)

+38 050 457 13 30 — Рашид - продажи новинок
e-mail: msd@msd.com.ua
Схема проезда к производственному офису:
Схема проезда к МСД

Партнеры МСД

## Контакты для заказов шлакоблочного оборудования:

+38 096 992 9559 Инна (вайбер, вацап, телеграм)
Эл. почта: inna@msd.com.ua

За услуги или товары возможен прием платежей Онпай: Платежи ОнПай