Welcome to

General
Mathematics
class
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 MONEY

1. STOCKS
2. BONDS
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 STOCKS
AND BONDS
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 Illustration:

Classic Covers, Inc. is a company selling

literature, history, and philosophy books.
To expand its operations, it needs to raise
money. The company can do this by
issuing stocks or bonds or both.
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 PART-OWNER
OF THE COMPANY CREDITORS TO THE
COMPANY

MAY OR MAY MAY OR MAY

NOT RECEIVE NOT RECEIVE
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 Stock
-is a share of ownership in
a business or company.
-form of equity financing
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 Suppose four people formed a business with
each contributing ₱10M. If this amount is
equivalent to 1 share, then each one owns 1/4
of the business.

₱10M ₱10M ₱10M ₱10M

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 Suppose another four people formed a
corporation with the following contributions.
If ₱10M is one part of the business, then

A - ₱20M B - ₱10M C - ₱10M D - ₱30M

2/7 1/7 1/7 3/7
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 Terminologies:
1. Dividend – share in the company’s profit
2. Dividend per share – ration of the dividends
to the number of shares
3. 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)
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 Terminologies:
4. Market Value – the current price of a stock at which it
can be sold
5. Stock Yield Ratio – ratio of the annual dividend per
share and the market value per share. Also called current
stock yield.
6. 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
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 2 Types of Stock
1. Preferred Stock
-gets dividends that are fixed percent
returns on the par value of their
investments
-usually do not have voting rights
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 2 Types of Stock
2. Common Stock
-have share in the company's
profit
-have voting rights
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 Bonds
-is a loan/debt to investors
-form of debt financing
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 Terminologies:
1. Coupon – periodic interest payment that the
bondholder receives during the time between
purchase date and maturity date; usually received
semi-annually
2. Coupon Rate – the rate per coupon payment
period; denoted by r
3. Price of a Bond – the price of the bond at a
purchase time; denoted by P
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 Terminologies:
4. 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.
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 Terminologies:
5. 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.
6. Fair Price of a Bond – present value of all cash
inflows to the bondholder
7. Yield- indicates annual return until the bond
matures.
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 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.
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 A bond index or bond
market index is a method
of measuring the value of a
section of the bond market.
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Thank
you!
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