Grade

11
/1
2
Learning Competency: (1) Illustrates stocks and bonds, (2) Distinguish between stocks and
bond, (3) Describe different markets for stocks and bonds and (4) Analyze the different indices
for stocks and bonds.

Code: M11GM-IIe-1, e-2 and e-3

Semester: 1st Semester
Quarter: 2nd Quarter
Number of Hours: 4 Hours

Prepared by:
MARILOU V. TOMPONG

Department of Education • Republic of the Philippines

1
 WHAT’S NEW
LESSON 1
Stocks and Bonds

Most Filipinos are engaged in different types of investment. Some investments

that are less explored are stocks and bonds. In this lesson, you will learn the basic
concepts of financial management of stocks and bonds.

What I Need to Know

By the end of this lesson, you are expected to:

1. Illustrates stocks and bonds and distinguish between stocks and

bonds
a. Definition of terms related to stocks
b. Definition of terms related to bonds
c. Examples

To achieve the objectives of this module, do the following:

 Take your time reading the lessons carefully.

 Follow the directions and/or instructions in the activities and exercises

diligently.

 Answer all the given tests and exercises.

2
 What I know…

PRE – TEST
Direction: Choose the letter of the correct answer and write the correct letter on the
separate sheet of paper.

1. It is a share in the ownership of a company.

a. Stocks b. Bond
c. Share d. Stock Market
2. It is a place where stocks can be bought or sold.
a. Stocks b. Bond
c. Share d. Stock Market
3. It is an interest- bearing security which promises to pay a stated amount on the maturity
and regular interest payments.
a. Stocks b. Bond
c. Share d. Stock Market
4. Investors are guaranteed interest payments and return of their money at the maturity
date.
a. Stocks b. Bond
c. Share d. Stock Market
5. It is the current price of a stock at which it can be sold.

a. Stock Market b. Bond Market

c. Market Value d. Par Value
6. It is the measure of the value of a section of the stock market and is computed from the
price of selected stocks.
a. Stock Index b. Bond Index
c. Market Value d. Par Value
7. It is lower risk but lower yield.
a. Stocks b. Bonds
c. Share d. Stock Market

8. It is the amount payable on the maturity date

3
 a. Stock Market b. Bond Market
c. Market Value d. Par Value
9. It is ratio of the annual dividend per share and the market value per share.
a. Stock Market b. Bond Market
c. Stock Yield Ratio d. Par Value
10. It is a method of measuring the value of a section of the bond market.
a. Stock Index b. Bond Index
c. Stock Yield Ratio d. Bond Yield Ratio
11. A certain corporation declared a 5% dividend on a stock with a par value of ₱900.00. Mrs.
L owns 250 shares of stock with a par value of ₱900.00. How much is the dividend she
received?
a. ₱12,150.00 b. ₱11,150.00
c. ₱11,250.00 d. ₱12,250.00
12. Mr. Vincent Gomez bought sixty ₱1,500.00 ACTS bonds at 103. What is his total
investment in ACTS bonds?
a. ₱109,270.00 b. ₱97,700.00
c. ₱92,200.00 d. ₱92,700.00
13.It is fixed period of time (in years) at which the bond is redeemable as stated in the bond
certificate; number of years from time of purchase to maturity date .
a. Term b. Rate
c. Stock Yield Ratio d. Bond Yield Ratio
14. Mrs. Scarlet owns 65 bonds with a par value of ₱2,000 each and pays 10 %
interest.Whatannual income does Mrs. Scarlet get from these bonds?
a. ₱10,000.00 b. ₱11,000.00
c. ₱12,000.00 d. ₱13,000.00
15. Find the yield on ₱5,000.00, 12% ACTS bond priced at 95 plus ₱20 commission.
a. 11.58% b. 12.58%
c. 13.58% d. 14.58%

4
LET’S EXPLORE:

Your grandparents gave you ₱175,000.00 on your 16th birthday. You were instructed
to invest the money so that the earnings can be used to pay for your tuition fee in college.
Having heard about the risks and rewards of the stock market from you parents, you become
interested in buying stocks in a particular company. Below are the options given to you by
your parents:
Option 1: Company ABC’s selling stock is ₱1,500.00 per share that will have a dividend of
₱200.00 per year. The stock can be sold after two years at ₱2,000.00 and the
market requires a rate of return of 15%.
Option 2: Company XYZ’s selling stock is ₱1,000.00 per share that will have a dividend of
₱180.00 per year. The stock can be sold after two years at ₱2,000.00 and the
market requires a rate of return of 7%.

In which company will you invest your money? Why?

WHAT’S NEW

1. Illustrates Stocks and Bonds

Stocks
Stock is a share of ownership in a business or company.
Some corporations may raise money for their expansion by issuing stocks. Stocks are
shares in the ownership of the company. Owners of stocks may be considered as part owners
of the company.
There are two types of stocks: Common stock and preferred stocks. Both will receive
dividends or share of earnings of the company. Dividends are paid first to preferred
shareholders.

5
 Stocks can be bought or sold at its current price called the market value. When a
person buys some shares, the person receives a certificate with the corporations name,
owners name, number of shares and par value per share.

The stakeholders are the owners of the firm.

Stock valuation is important in order to compare the price of the stock with respect to
the market.

Bonds

Bond is a debt of the firm.

A bond is a certificate which proves that a company or corporation borrowed money

from a certain group of individuals or investors for a definite period of time at a fixed rate.
Owning a bond is just like saving money from a bank in which you will earn interest from the
amount borrowed.

A bond can be bought from a company or other people. The bond is said to have a
high value if it earns high interest payment compared to the market interest rate. Otherwise,
the bond is valued low.

Bonds are interest bearing security which promises to pay amount of money on a
certain maturity date as stated in the bond certificate. Unlike stockholders, bondholders are
lenders to the institution which may be a government or private company. Some bond issues
are the national government, government agencies, government owned and controlled
corporations, non-bank corporations, banks and multilateral agencies.

2. Distinguish between stocks and bonds

STOCKS BONDS

A form of equity financing or raising money by A form of debt financing, or raising money by
allowing investors to be part owners of the borrowing from investors
company.

6
Stock prices vary every day. These prices are Investors are guarantee interest payments and a
reported in various media (newspaper, TV, return of their money the maturity date.
internet, etc.

Uncertainty comes from the ability of the bond

issuer to pay the bondholders. Bonds issued by
Investing in stock involves some uncertainty.
the government pose less risk than whose by
Investors can earn if the stock prices increase, but
companies because the government has
they can lose money if the stock prices decrease
guaranteed funding (taxes) from which it can pay
or worse, if the company goes bankrupt.
its loans.

Higher risk but with possibility of higher returns Lower risk but lower yield.

Can be appropriate for retirees (because of the

Can be appropriate if the investment is for the
guaranteed fixed income) or for those who need
long term (10years or more). This can allow
the money soon (because they cannot afford to
investors to wait for stock prices to increase if
take a chance at the stock market)
ever they go low.

3. Definition of terms in relation to stocks.

 Stocks – share in the ownership of a company
 Dividend – share in the company’s profit
 Dividend per share – ration of the dividends to the number of shares
 Stock Market – a place where stocks can be bought or sold. The stock market in the
Philippines is governed by the Philippine Stock Exchange (PSE)
 Market Value – the current price of a stock at which it can be sold
 Stock Yield Ratio – ratio of the annual dividend per share and the market value per
share. Also called current stock yield.
 Par Value – the per share amount as stated on the company certificate. Unlike market
value, it is determined by the company and remains stable over time

3. Definition of terms in relation to bonds.

 Bond – interest bearing security which promises to pay

(a.) a stated amount of money on the maturity date, and

(b.) regular interest payments called coupons

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  Coupon – periodic interest payment that the bondholder receives during the time
between purchase date and maturity date; usually received semi-annually
 Coupon Rate – the rate per coupon payment period; denoted by r
 Price of a Bond – the price of the bond at a purchase time; denoted by P
 Par Value or Face Value – the amount payable on the maturity date; denoted by
F

If P = F , the bond is purchased at par.

If P < F , the bond is purchased at a discount.
If P > F, the bond is purchased at premium.

 Term (or Tenor) of a Bond – fixed period of time (in years) at which the bond is
redeemable as stated in the bond certificate; number of years from time of
purchase to maturity date .
 Fair Price of a Bond – present value of all cash inflows to the bondholder

What Is It?
Examples in Relation to Stocks.

Example 1. A certain financial institution declared a ₱30,000,000.00 dividend for the

common stocks. If there are a total of ₱700,000.00 shares of common stock,
how much is the dividend per share?
Solution:
Given: Total Dividend = ₱30,000,000.00

Total Shares = ₱700,000.00

Find: Dividend per Share = ?

8
 𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 = 𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒𝑠

30,000,000.00
=
70,000.00
= 42.86
Therefore, the dividend per share is ₱42.86

Example 2. A certain corporation declared a 3% dividend on a stock with a par value of

₱500.00. Mrs. Lingan owns 200 shares of stock with a par value of ₱500.00.
How much is the dividend she received?
Solution:
Given: Dividend Percentage = 3%
Par Value = ₱500.00
Number of Shares = 200
Find: Dividend = ?
The dividend per share is ₱500 x 0.03 = ₱15.00. Since there are 200 shares, the total dividend
is ₱15/share x 200 shares = ₱3,000.00
In summary,
Dividend = Dividend Percentage x Par value x Number of Shares
= 0.03(500)(200)
= 3,000
Therefore, the dividend is ₱3,000.00
Example 3. Corporation A, with a current market value of ₱52.00, ae a dividend of ₱8.00
per share for its common stock. Corporation B, with a current market value of
₱95.00, gave a dividend of ₱12.00 per share. Use stock yield ration to measure
how much dividends shareholders are getting in relation to the amount
invested.

Solution:

Corporation A
Given: Dividend per share = ₱8.00

Market Value = ₱52.00

Find: Stock Yield Ratio = ?

9
 Dividend per Share
Stock Yield Ratio =
Market Value
8
=
52
= 0.1538
= 15.38%

Corporation B
Given: Dividend per share = ₱12.00
Market Value = ₱95.00

Find: Stock Yield Ratio = ?

Dividend per Share
Stock Yield Ratio =
Market Value
12
=
95
= 0.1263
= 12.63%

Corporation A has a higher stock yield ratio than Corporation B. Thus, each peso would
earn you more if you invest in Corporation A than B. If all things are equal, then it is wiser to
invest in Corporation A.
As. Example 3 shows, the stock yield ration can be used to compare two or more investments.

What Is It?
Examples in Relation to Bonds.

Example 1. Determine the amount of the semi-annual coupon for a bond with a face value
of ₱300,000.00 that pays 10%, payable semi-annually for its coupons.
Solution:

10
 Given: Face Value F = ₱300,000
Coupon Rate r = 10%
Find: Amount of the Semi-annual Coupon = ?
Annual Coupon Amount = 300,000 ( 0.10) = 30,000
Semi-annual Coupon Amount : 30,000 (1/2) = 15,000
Thus, the amount of the semi-annual coupon is ₱15,000.00

Example 2: Ms. Claire Garcia bought fifty ₱1,000.00 ACTS bonds at 103. What is her total
investment in ACTS bonds?

Solution:
Market Price of 1 bond: 1.03 x ₱1,000 = ₱1, 030.00
Total investment: 1,030 x 50 = ₱51,500.00

Thus, the amount total investment is ₱51,500.00

When bonds are bought and sold through a broker, the broker charges a broker’s
commission or brokerage fee. Hence, the amount investment becomes the market price of the
bonds plus the broker’s commission.

Example 3. Mrs. Go owns 45 bonds with a par value of ₱1,000 each and pays 8 ½ %
interest. What annual income does Mrs. Go get from these bonds?
Solution:
Given: Number of Bonds = 45
Rate r = 8 ½ %
Par Value = 1,000
Find: Annual income= ?
Par Value of 45 bond: 45 x ₱1,000.00 = ₱45,000.00
Annual Income = Par Value of Number of bonds x rate x time

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 = ₱45,000 x 0.085 x 1
= ₱3,825.00
The annual income for one year is ₱3,825.00

Example 4. Find the yield on ₱1,000.00, 9% ACTS bond priced at 94 plus ₱10 commission.
Solution:
Given: Par Value = 1,000
Rate r = 9 %
Commission = 10
Find: Yield (rate of income)= ?
Annual Income: ₱1,000.00 x 0.09 x 1 = 90
Amount Invested : Market Price + Commission
= (0.94 x ₱1,000) + ₱10

= ₱940 + ₱10
= ₱950.00
𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑐𝑜𝑚𝑒
Yield (Rate of Income) = 𝐴𝑚𝑜𝑢𝑛𝑡 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑
90
= 950 = 0.0947

= 9.47%

The yield on the investment is 9.47% or ACTS Corporation bond yields at 9.47%.

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 Activity 1.

A. Find the net proceeds of the stocks on the table below.

Expenses
Selling Price
Name of Stock Shares Held (Commission, Net Proceeds
per Share
taxes and Fees)
1. Food 100
₱1,040.00 ₱2,640.00
Corporation
2. Property
250 ₱500.00 ₱1,720.00
Holdings
3. Power
80 ₱1,480.00 ₱1,880.00
Corporation
4.Transportation
300 ₱320.00 ₱2,240.00
Corporation

B. Answer the following problems completely

1. Tim bought 50 shares of Clarky stock at ₱685.00 per share and paid ₱956.00 commission.
Find Tim’s total investment.

2. A land developer declared a dividend of ₱10,000.00 for its common stock. Suppose there
are 600,000 shares of common stock, how much is the dividend per share?

3. A property holdings declared of ₱9 per share for the common stock. If the common stock
closes at ₱76, how large is the stock yield ration on this investment?

13
 WHAT I HAVE LEARNED

Stock is a share of ownership in a business or company.

Some corporations may raise money for their expansion by issuing stocks. Stocks are shares in
the ownership of the company. Owners of stocks may be considered as part owners of the company.
There are two types of stocks: Common stock and preferred stocks. Both will receive dividends
or share of earnings of the company. Dividends are paid first to preferred shareholders.

Stocks can be bought or sold at its current price called the market value. When a person buys
some shares, the person receives a certificate with the corporations name, owners name, number of
shares and par value per share.

Bond is a debt of the firm.

A bond is a certificate which proves that a company or corporation borrowed money from a
certain group of individuals or investors for a definite period of time at a fixed rate. Owning a bond is
just like saving money from a bank in which you will earn interest from the amount borrowed.

STOCKS BONDS

A form of equity financing or raising money by A form of debt financing, or raising money by
allowing investors to be part owners of the borrowing from investors
company.

Stock prices vary every day. These prices are Investors are guarantee interest payments and a
reported in various media (newspaper, TV, return of their money the maturity date.
internet, etc.

Uncertainty comes from the ability of the bond

issuer to pay the bondholders. Bonds issued by
Investing in stock involves some uncertainty.
the government pose less risk than whose by
Investors can earn if the stock prices increase, but
companies because the government has
they can lose money if the stock prices decrease
guaranteed funding (taxes) from which it can pay
or worse, if the company goes bankrupt.
its loans.

Higher risk but with possibility of higher returns Lower risk but lower yield.

14
 Can be appropriate for retirees (because of the
Can be appropriate if the investment is for the guaranteed fixed income) or for those who need
long term (10years or more). This can allow the money soon (because they cannot afford to
investors to wait for stock prices to increase if take a chance at the stock market)
ever they go low.

ASSESSMENT
After our lesson, let us check what have you learned

A. Tell whether the following is a characteristic of stocks and bonds.

1. It can be appropriate for retirees (because of the guaranteed fixed income) or for
those who need the money soon.

2. Investors can earn if the security prices increase, but they can lose money if the
security prices decrease od worse, if the company goes bankrupt.

3. A form of equity financing,or raising money by allowing investors to be part of the

company.

4. A form of debt financing,or raising money by borrowing from investors.

5. Investors are guaranteed interest payments and a return of their money at the
maturity date.

B. Answer the following problems completely.

1. A ₱450,000.00 bond is redeemable at ₱550,000.00 after 5 years. Coupons are given

at 5% convertible semi-annually. Find the amount of the semi-annual coupon.

15
2. A certain land developer declared a dividend of ₱28 per share for the common
stock. If the common stock is closes at ₱99.00, how large is the stock yield ratio on this
investment?

3. A food corporation declared a dividend of ₱25,000,000 for its common stock.

Suppose there are 180,000 shares of common stock, how much is the dividend per
share?

4. Determine the amount of a semi-annual coupon paid for a 3% bond with a face
value of ₱80,000 which matures after 15 years.

5. A certain financial institution declared ₱57 dividend per share for its common stock.
The market value of the stock is ₱198. Determine the stock yield ratio.

16
 WHAT’S NEW
LESSON 2
Market Indices for Stock and Bonds

What I Need to Know

By the end of this lesson, you are expected to:

1. Describe the different markets for stocks and bonds and analyze
the different market indices for stocks and bonds
Lesson Outline:
1. Stock Market Indices
2. Stock Market Tables
3. Practical Information about Stocks
4. Bond Market Index
5. Practical Information about Bonds

To achieve the objectives of this module, do the following:

 Take your time reading the lessons carefully.

 Follow the directions and/or instructions in the activities and exercises

diligently.

 Answer all the given tests and exercises.

17
 WHAT’S NEW
LESSON 2.1
Market Indices for Stocks and Bonds

1. The Stock Market

A Stock Index or Stock Market Index is the measure of the value of a section of the
stock market and is computed from the price of selected stocks. Investors and financial
managers use this to describe the market and compare the return on specific investment.
One example is the PSE Composite Index or PSEi. It is composed of 30 companies carefully
selected to represent the general movement of market prices. The up and down movement
in percent change over time can indicate how the index is performing.
Other indices are sector indices, each representing sector (e.g., financial institutions,
industrial corporations, holding firms, service corporations, mining/oil, and property)
The stock index can be a standard by which investors can compare the performance
of their stocks. A financial institution may want to compare its performance with those of
others. This can be done by comparing with the “financial” index.

2. Stock Market Table

Stock indices are reported in the business section of magazines or newspapers, as well
as online. The following table shows how a list of index values is typically presented (values
are hypothetical).

Index Val Chg %Chg

PSEi 7,523.93 -14.20 -0.19
Financials 4,037.83 6.58 0.16
Holding Firms 6,513.37 2.42 0.037
Industrial 11,741.55 125.08 1.07
Property 2,973.52 -9.85 -0.33
Services 1,622.73 -16.27 -1.00

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 In the table above, the terms mean the following:
 Val – value of the index
 Chg – change of the index value from the previous trading day (i.e., value today minus
value yesterday)
 %Chg – ratio of change of the index (Chg) to Val ( i.e., Chg dibided by Val)

STOCK TABLES
Newspapers or magazine may also report on stock prices of individual companies. The
following table shows how information about stocks can be presented values are
hypothetical).

52 – WK 52 – WK
STOCK HI LO DIV VOL (100s) CLOSE NETCHG
HI LO
94 44 AAA 60 35.5 0.70 2050 57.29 0.10
88 25 BBB 45 32.7 0.28 10700 45.70 -0.20

In the table above, the terms mean the following:

 52 – WK HI/LO – highest/ lowest selling price of the stock in the past 52 weeks
 HI/LO – highest/lowest selling price of the stock in the last trading day
 STOCK – three-letter symbol the company is using for trading
 DIV – dividend per share last year
 VOL (100s) – number of shares (in hundreds) traded in the last trading day (In this
case, stock 100 AAA sold 2,050 shares of 100 which is equal to 20,500 shares)
 CLOSE – closing price on the last trading day.
 NETCHG – net change between the two last trading days (in the case of AAA, the net
change is 0.10. Tha closing price the day before the last trading is ₱57.29 - ₱0.10 =
₱57.19.)

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 BUYING OR SELLING STOCKS

To buy or sell stocks, one may go to the Philippine Stock Exchange (PSE) personally.
However, nowadays are done making a phone call to a registered broker or by logging on
to a reputable online trading platform. Those with accounts in online trading platforms
may often encounter a table like the following:
BID ASK/OFFER
SIZE PRICE PRICE SIZE
122 354,100 21.60 21.80 20,000 1
9 81,700 21.55 21.90 183,500 4
42 456,500 21.50 22.15 5,100 1
2 12,500 21.45 22.25 11,800 4
9 14,200 21.40 22.30 23,400 6

In the table above, the terms mean the following:

 Bid Size – the number of individual buy orders and the total number of shares that
wish to buy
 Bid Price – the price these buyers are willing to pay for the stock
 Ask Price – the price the sellers of the stock are willing to sell the stock
 Ask Size – how many individual sell orders have been placed in the online platform
and the total number of shares these sellers wish to sell.
For example, the first row under BID means that there are total of 122 traders who wish to
buy a total of 354,100 shares at ₱21.60 per share. On the other hand, the first row under ASK
means that just 1 trader is willing to sell his 20,000 at a price of ₱21.80 per share.

3. BOND MARKET INDICES

A bond index or bond market index is a method of measuring the value of a section of the
bond market. The main platform for bonds or fixed income securities in the Philippines is the
Philippine Dealing and Exchange Corporation (or PDEx). Unlike stock indices which are
associated with virtually every stock market in the world, bond market indices are far less
common. In fact, other than certain regional bond indices which have subindices covering the

20
Philippines, our bond market does not typically compute a bond market index. Instead, the
market rates produced from the bond market are interest rates which may be used as
benchmarks for other financial instruments.

WHAT IS IT…
Activity: Fill in the blanks.
1
1. _______________ the number of individual buy orders and the total number of shares that
wish to buy
2._______________ the measure of the value of a section of the stock market and is
computed from the price of selected stocks.
3. _______________are reported in the business section of magazines or newspapers, as well
as online.
4. To buy or sell stocks, one may go to the ___________________ personally.
5. A financial institution may want to compare its performance with those of others. This can
be done by comparing with the _____________ index.
6. ____________is a share of ownership in a business or company.
7. The market rates produced from the bond market are ___________ rates which may be
used as benchmarks for other financial instruments.
8. The price these buyers are willing to pay for the stock is called _____________.
9. The share in the company’s profit is called _____________.

10. A ______________ is a method of measuring the value of a section of the bond market.

21
 WHAT I HAVE LEARNED

1. The Stock Market

A Stock Index or Stock Market Index is the measure of the value of a section of the stock
market and is computed from the price of selected stocks. Investors and financial managers use this
to describe the market and compare the return on specific investment.
One example is the PSE Composite Index or PSEi. It is composed of 30 companies carefully selected to
represent the general movement of market prices. The up and down movement in percent change
over time can indicate how the index is performing.
Other indices are sector indices, each representing sector (e.g., financial institutions, industrial
corporations, holding firms, service corporations, mining/oil, and property)
The stock index can be a standard by which investors can compare the performance of their
stocks. A financial institution may want to compare its performance with those of others. This can be
done by comparing with the “financial” index.
 Bid Size – the number of individual buy orders and the total number of shares that wish to
buy
 Bid Price – the price these buyers are willing to pay for the stock
 Ask Price – the price the sellers of the stock are willing to sell the stock
 Ask Size – how many individual sell orders have been placed in the online platform and the
total number of shares these sellers wish to sell.
A bond index or bond market index is a method of measuring the value of a section of the bond
market.

22
 Assessment
After our lesson, let us now check what you have
learned.

Direction: Match the terms in Column A to the

statements in column B.

A B

1. Bid price a. Measure of the value of a section of the stock market

and is computed from the price of selected stocks.

2. Bond Index b. It is share of ownership in a business or company .

3. Stocks c. Method of measuring the value of a section of the
bond market.
4. Bonds d. The price these buyers are willing to pay for the stock
5. Bid Size e. Interest bearing security which promises to pay
amount of money on a certain maturity date as stated
in the bond certificate.
6. Stock Market f. It is how many individual sell orders have been placed
in the online platform and the total number of shares
these sellers wish to sell.
7. Par Value g. It is the current price of a stock at which it can be sold
8. Market Value h. The number of individual buy orders and the total
number of shares that wish to buy
9. Ask Size i. A place where stocks can be bought or sold.
10. Stock Index j. The per share amount as stated on the company
certificate.

23