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:D STOCKS VS.

BONDS
HANDOUT GIKAN SAINYONG GWAPO NA TEACHER

STOCKS FORMULAS
STOCKS
𝑐𝑙𝑜𝑠𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 − 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒
Percent change =
• EQUITY 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒
FINANCING 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
Stock yield ratio =
• Buying stocks 𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒
basically make a Finding the yearly income
part-owner of the 1st: Multiply number of shares and dividend
company
• High risk 2nd: number of payments in a year multiplied
to dividend

BONDS BONDS FORMULAS

• Debt financing 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
AMOUNT OF COUPON = BOND(𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑)
• You are basically
lending money to ANNUAL INCOME
1ST: MULTIPLY PAR VALUE TO NUMBER OF SHARES
the company
2ND: USE SIMPLE INTEREST I=PRT OR PAR VALUE X RATE X TIME
• The company has
FINDING THE YIELD:
an obligation to
1ST: GET THE ANNUAL INCOME: PRT
pay you interest
2ND: GET THE AMOUNT INVESTED= MARKET PRICE+COMMISSION
every end of your 𝑎𝑛𝑛𝑢𝑎𝑙 𝑖𝑛𝑐𝑜𝑚𝑒
term 3RD: GET THE RATE OF INCOME 𝑎𝑚𝑜𝑢𝑛𝑡 𝑖𝑛𝑣𝑒𝑠𝑡𝑒𝑑)
EXAMPLES

STOCKS PROBLEMS
On a certain trading day, eden corp.’s opening price was ₱41.50 and its closing price was ₱39.10. what
is the percent change?
𝑐𝑙𝑜𝑠𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 − 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒
Percent change =
𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒
39.10−41.50
= 41.50
≈ −0578
Percent change = -5.78%

CORPORATION a and b each gave a dividend of ₱8 per share of its common stock. The market price of
corporation a is ₱105.80 and the market price of corporation b is ₱140.50. calculate the stock yield ratio
of each.
𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
corporation a = 𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒
corporation b = 𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒
8
= 105.80 8
= 140.50
Stock yield ratio of corp a:
Stock yield ratio of corp a:
= o.0756
= o.0569
The stock yield ratio allows us to compare two corporations. Even if corporations a and b give the same
dividends, we should also consider, each invested peso would earn more in corporation a than in
corporation b

Find the yearly income of mr.zyrus will receive from an investment in 1000 shares of cnn stock if a
dividend of ₱14.80 per share is paid quarterly

Dividend for one quarter 1000 x ₱14.80 = ₱14,800

Yearly income: 4 x ₱14,800 = ₱59,200

If jon snow owns a share of stock that costs ₱960 and pays quarterly dividend of ₱22.40, what is the rate
of income of his stock investment?
22.40 𝑥 4
Percent change = 960
1
= 0.0933 or 93%
BONDS PROBLEMS
Find the amount of semi-annual coupon for a ₱500,000 bond which pays 5% interest, compounded semi-
annually for its coupons.
𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
coupon= bond(𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑)
0.05
= 500,000( 2
)

Coupon = ₱12,500
1
Mr. ironborn owns 45 bonds with a par value of ₱1000.00 each and pays 8 % interest. What annual
2
income does mr. ironborn get from these bonds? .
Par value of 45 bonds: 45 x ₱1000.00 = ₱45,000.00
Interest = par value x rate x time
Interest ₱45,000 x 0.085 x 1 = ₱3825

the annual income for one year is ₱3825.00

Find the yield on ₱1000.00, 9% cnn bond priced at 94% plus ₱10 commission.
Annual income ₱1000 x 0.09 x 1 = ₱90
Amount invested: market price + commission
(0.94x ₱1000.00 ) + ₱10 = ₱950
90
Yield(rate of income) = = 0.0947 = 9.47%
950
The yield on the investment is 9.47%

THEORY OF EFFICIENT MARKETS

• DEVELOPED by eugene fama during the 1970’s
• It says that stock prices already reflects all the available relevant information
• Assumption that is the stock prices are “Correct” and there is no overvalued or undervalued
stock

WEAK FORM
• STATES THAT STOCK PRICES CORRECTLY REFLECT ALL THE HISTORICAL Information about
the stock

SEMI STRONG FORM

• STATES THAT STOCK prices correctly reflect all the public information about the stock

STRONG FORM
• STATES THAT STOCK prices correctly reflect all the public and private information about the
stock