Forum 2

Jack and Rose, acting on the recommendation of their neighbor, recently purchased their first stock, 500 shares of a small capitalization Internet company trading at $80 per share. The neighbor informed them that the stock was a real money maker because it recently had a two-for-one stock split and would probably split again soon. Even better, according to their neighbor, the company was predictable to earn $1 per share and pay a $0.25 dividend next year. Jack and Rose have so far been unimpressed with the stocks performancethe stock had underperformed the S&P500 index this year.

Application:

Jack and Rose have come to you for advice. What do you think?