|
|
Enron Mail |
======================== THE MOTLEY FOOL ======================== INVESTING BASICS Tuesday, September 18, 2001 benjamin.rogers@enron.com ================================================================= IN THIS ISSUE --------------------- - Q&A: What's Up With P/E Ratios? - Q&A: Why Do Bonds Fall When Rates Rise? - LESSON: Banking the Right Way ================================================================= SPONSORED BY: Kaplan College Become a Financial Planner! Kaplan College's online Cert. in Financial Planning program prepares you for success in the #1 ranked profession. Invest in your future career today! http://www.lnksrv.com/m.asp?i=497031 ================================================================= YOUR QUESTIONS ANSWERED Q. HOW COULD A COMPANY HAVE A PRICE-TO-EARNINGS (P/E) RATIO OF 77 AND A PROJECTED P/E OF 22? A. If it currently trades at $77 per share and has $1 per share in annual earnings, its P/E is 77. If it's growing rapidly and is expected to earn $3.50 next year, the projected P/E for that year is 22 (77 divided by 3.50 is 22). Q. WHY DO BONDS FALL IN VALUE WHEN INTEREST RATES RISE? A. To be precise, the prices of existing bonds will fall when interest rates rise. The prices of newly issued bonds are fixed. But let's back up a bit. Higher interest rates mean that companies are likely to borrow less, produce less and thus earn less. Since stock prices are tied to how much a company can earn, higher interest rates theoretically cause stock prices to fall. This, coupled with rising bond interest rates, makes bonds more attractive to investors. Imagine 5 percent bonds with 10 years left until maturity that originally sold for $1,000 each. If you buy these bonds now, you'll be getting $50 per year from each of them and then $1,000 at maturity. But if interest rates have risen since those bonds were issued and you can buy new 10-year bonds that pay you 10 percent, that amounts to $100 per year per $1,000 invested. You would obviously be willing to pay more for the 10-percent bonds than the 5 percent ones. So the price of 5 percent bonds will fall. It will fall to the point where $1,000 invested in the 5 percent bond will bring you same total yield-to-maturity as $1,000 invested in the new bond. ----------------------------------------------------------------- THIS WEEK'S LESSON BANKING THE RIGHT WAY All banks are not alike. You may have chosen yours for one good reason, but learn more about your options and you might discover some ways to save money. Here are some things to chew on: - If you chose a bank due to its location, know that these days, with newfangled inventions like the telephone, direct deposit, the U.S. mail system, and even, dare we say, the Internet, you don't need to be particularly close to a bricks-and-mortar branch of any bank - A good way to figure out exactly which of a bank's services you most need to pay attention to is to make a list. Jot down the following items on a sheet of lined paper and make three columns, where you enter how much you spent for each category in each of the past three months: ATM surcharges, "foreign" ATM fees, other ATM fees, overdrafts, monthly maintenance fees, check printing, deposit/other slips, call center charges, debit card fees, low-balance penalty, per-check charges, return check/NSF fees, money order fees, traveler's checks, and other bank fees. This will help you quickly see where your money is going and what features you should examine when evaluating a bank. - If you're parking any money in CDs, make sure you look around for the best rates. Check sites such as Bankrate.com and you could end up earning 2 percent more at a small bank a few states away. Bankrate.com: http://www.lnksrv.com/m.asp?i=497032 - You can often get a higher interest rate on your checking account at a small regional bank than at a big national one. Better still, some discount brokerages are now offering banking services. TD Waterhouse is a good example, offering money market accounts, checking, direct deposit, and more (Waterhouse.com, 800-839-2837). Waterhouse.com: http://www.lnksrv.com/m.asp?i=497033 - Use direct deposit. It saves time and some banks will give you free checking if you use it. - Don't order checks from your bank, which might charge as much as $25 for 200. You can get the same thing for a quarter of the price through services such as Currentchecks.com (800-204-2244) or Checksinthemail.com (877-397-1541). Currentchecks.com: http://www.lnksrv.com/m.asp?i=497034 Checksinthemail.com: http://www.lnksrv.com/m.asp?i=497035 For more information and tips on the net, pop over to financeservices.about.com and Gomez.com. Or visit our banking information area at Fool.com: http://www.fool.com/m.asp?i=497036 Gomez.com: http://www.lnksrv.com/m.asp?i=497037 Financeservices.about.com: http://www.lnksrv.com/m.asp?i=497038 ================================================================= SPONSORED BY: Kaplan College Become a Financial Planner! Kaplan College's online Cert. in Financial Planning program prepares you for success in the #1 ranked profession. Invest in your future career today! http://www.lnksrv.com/m.asp?i=497039 ================================================================= My Portfolio: http://www.fool.com/m.asp?i=497040 My Discussion Boards: http://www.fool.com/m.asp?i=497041 WANNA TAKE THE SHORTCUT? Check out our new Crash Courses, the fastest way to get your finances in order. Get results in less than an hour, for just $10. Try one today! http://www.fool.com/m.asp?i=497042 PERKS FOR FOOLS ONLY Get free stuff and special offers, just for you! http://www.fool.com/m.asp?i=497043 CUSTOMER SERVICE Ask our staff for help with email delivery problems. http://www.fool.com/m.asp?i=497044 UNSUBSCRIBE Here's how to unsubscribe or change your settings. http://www.fool.com/community/freemail/freemaillogin.asp?email=benjamin.rogers@enron.com _________________________________________________________________ Copyright © 1995-2001 The Motley Fool. All rights reserved. Legal Information: http://www.fool.com/m.asp?i=497045 MsgId: msg-28938-2001-09-18_12-36-36-4539617_5_Plain_MessageAddress.msg-12:38:11(9-18-2001) X-Version: mailer-sender-master,v 1.84 X-Version: mailer-sender-daemon,v 1.84 Message-Recipient: benjamin.rogers@enron.com
|