S t o c k s

a n d B o n d s
GENMATH 11
 STOCKS AND BONDS
STOCKS BONDS
A form of equity financing or
A form of debt financing,
raising money by allowing
or raising money by
investors to be part owners
borrowing from investors.
of the company.
 STOCKS vs. BONDS
Guaranteed interest payments and a return of
Stock prices varies everyday. their money at the maturity date.

If the stock prices increase, investors Needs to consider borrower's credit rating.
can earn money. But if the stock prices Government-issued bonds are less risky
decrease or get worse, they can lose because they have guaranteed funding (taxes)
money. to pay back loans.

Higher risk but with possibility of higher

Lower risk but lower yield.
returns.

Appropriate for long-term investments because Appropriate for retirees (guaranteed fixed
investors can wait for stock prices to increase. income) or quick investments
 Terms in Relation to
Stocks
STOCKS MARKET VALUE
share in the ownership of a company. the current price of a stock at which it
can be sold.
DIVIDEND
share in the company's profit STOCK YIELD RATIO /
CURRENT STOCK YIELD
DIVIDEND PER SHARE ratio of the annual dividend per share
ratio of the dividends to the number of and the market value per share.
shares.
PAR VALUE
STOCK MARKET the per share amount as stated on the company
a place where stocks can be bought or
certificate. Unlike Market Value, it is determined
sold.
by the company and remains stable over time.
 STOCKS FORMULAS

DIVIDEND PER SHARE

= Total Dividend / Total Shares
DIVIDEND PER SHARE
= (Dividend Percentage)(Par Value)
TOTAL DIVIDEND
= (Dividend Per Share)(Number of Shares)
DIVIDEND
= (Dividend Percentage)(Par Value)(No. of Shares)
STOCK YIELD RATIO
= Dividend Per Share / Market Value
 example #1
A certain financial institution declared a Php 30 000 000 dividend
for the common stocks. If there are a total of Php 700 000 shares
of common stock, how much is the dividend per share?
 example #1
A certain financial institution declared a Php 30 000 000 dividend
for the common stocks. If there are a total of Php 700 000 shares
of common stock, how much is the dividend per share?

GIVEN: SOLUTION:
Total Dividend = Php 30 000 000
Total Dividend
Total Shares = Php 70 000 Dividend Per Share =
Total Share
30 000 000
FIND: =
700 000
Dividend Per Share ANSWER:
The dividend per share is Php 42.86
 example #2
A certain corporation declared a 3% dividend on a stock with a par
value of Php 500. Mrs. Lingan owns 200 shares of stock with a par
value of Php 500. How much is the dividend she received?
 example #2
A certain corporation declared a 3% dividend on a stock with a par
value of Php 500. Mrs. Lingan owns 200 shares of stock with a par
value of Php 500. How much is the dividend she received?

GIVEN: SOLUTION:
Dividend Percentage = 3% Dividend
Par Value = Php 500 = (Dividend Percentage)(Par Value)(No. of Shares)

Number of Shared = Php 200 = (0.03)(500)(200)

= Php 3 000

FIND:
Dividend ANSWER:
The dividend is Php 3 000
 example #3
Corporation A, with a current market value of Php 52, gave a dividend of Php
8 per share for its common stock. Corporation B, with a current market value
of Php 95, gave a dividend of Php 12 per share. Use the stock yield ratio to
measure how much dividends shareholders are getting in relation to the
amount invested.
 example #3
Corporation A, with a current market value of Php 52, gave a dividend of Php
8 per share for its common stock. Corporation B, with a current market value
of Php 95, gave a dividend of Php 12 per share. Use the stock yield ratio to
measure how much dividends shareholders are getting in relation to the
amount invested.
CORPORATION A SOLUTION:
GIVEN:
dividend per share
Dividend per share = Php 8 stock yield ratio =
market value
Market Value = Php 52 Php 8
Php 52
FIND:
= 0.1538 or 15.38%
Stock yield ratio
 example #3
CORPORATION B SOLUTION:
GIVEN:
dividend per share
Dividend per share = Php 12 stock yield ratio =
market value
Market Value = Php 95 Php 12
Php 95
FIND:
= 0.1263 or 12.63%
Stock yield ratio

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 in
Corporation B. If all other things are equal, then it is wiser to invest in
Corporation A.
 Terms in Relation to
Bonds
BOND
interest-bearing security which promises to pay
(1) a stated amount of money on the maturity date
(2) regular interest payments called coupons

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 purchase time; denoted by P
 Terms in Relation to
Bonds
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 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.
 example #4
Determine the amount of the semi-annual coupon for a bond with a face
value of Php 300 000 that pays 10%, payable semi-annually for its
coupons.
 example #4
Determine the amount of the semi-annual coupon for a bond with a face
value of Php 300 000 that pays 10%, payable semi-annually for its
coupons.

GIVEN: SOLUTION:
Face Value F = Php 300 000 Annual coupon amount:
Coupon Rate r = 10% 300 000 (0.10) = 30 000
Semi-annual coupon amount:
FIND: 30 000 (1/2) = 15 000
Amount of the semi-annual
coupon ANSWER:
The amount of the semi-annual coupon is
Php 15 000.
 C O U P O N R A T E
is used only for computing the coupon amount, usually paid semi-
annually. It is not the rate at which money grows. Instead, current market
conditions are reflected by the market rate, and is used to compute the
present value of future payments.
 example #5
Suppose that a bond has a face value of Php 100 000 and its maturity
date is 10 years from now. The coupon rate is 5% payable semi-annually.
FInd the fair price of this bond, assuming that the annual market is 4%.
 example #5
Suppose that a bond has a face value of Php 100 000 and its maturity
date is 10 years from now. The coupon rate is 5% payable semi-annually.
FInd the fair price of this bond, assuming that the annual market is 4%.

GIVEN:
Coupon rate r = 5%, payable semi-annually
Face Value = Php 100 000
Time to maturity = 10 years
Number of periods = 2(10) = 20
Market rate = 4%

FIND:
Fair price


MARKET INDICES FOR

STOCKS AND BONDS
Stock Market Index

is a measure of a portion of the stock market

can be a standard by which investors can compare the

performance of their stocks
 Stock Index Tables
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

0.0037

Industrial

11, 741.55

125.08

1.07

Property

2, 973.52

-9.85

-0.33

Services

1, 622.64

-16.27

-1.00

Mining and

Oil 11, 914.73

28.91

0.24

Terms in Stock Index

Table
VAL
value of the index

CHG
change of index value from the previous
trading day (i.e. value today minus value
yesterday)

%CHG
ratio of Chg to Val (i.e., value today minus
value yesterday)
 STOCK TABLES
52-WK 52-WK VOL
STOCK HI LO DIV CLOSE NETCHG
HI LO (100s)

94 44 AAA 60 35.5 .70 2050 57.29 0.10

88 25 BBB 45 32.7 .28 10700 45.70 -0.2

 Terms in Relation to
Stock Tables
52-WK HI/LO DIV
highest/lowest selling price of the stock dividend per share last year
in the past 52 weeks
VOL (100s)
HI/LO number of shares (in hundreds) traded in the last
highest/ lowest selling price of the stock trading day
in the last trading day CLOSE
closing prices on the last trading day
STOCK
three-letter symbol the company is
NETCHG
using for trading net change between the two last trading days
 BUYING OR SELLING STOCKS
Bid Ask/Offer

Size Price Price Size

122 354,100 21.6000 21.8000 20,000 1

9 81,700 21.5500 21.9000 183,500 4

42 456,500 21.5000 22.1500 5,100 1

2 12,500 21.4500 22.2500 11,800 4

9 14,200 21.4000 22.3000 23,400 6

 Terms in Relation to
Buying or Selling Stocks
BID SIZE ASK PRICE
the number of individual buy orders and the price the sellers of the stock are willing to sell
the total number of shares they wish to the stock
buy

BID PRICE ASK SIZE

the price these buyers are willing to pay how many individual sell orders have been placed
for the stock in the online platform and the total number of
shares these sellers wish to sell
Bond Market Index

is a measure of a portion of the bond market

far less common than stock indices
our bond market does not typically compute a bond
market index
 The Bond Market and
Government Bonds
Government bonds are auctioned out to banks and other brokers and dealers every
Monday by the Bureau of Treasury.

These bonds are also called treasury bills (t-bills), treasury notes (t-notes), or treasury
bonds (t-bonds)

Bond prices fluctuate because they are traded among investors in what is called the
secondary market.

Some investors may choose to sell back to banks the bonds they acquired before their
maturity to cash in their gains even before maturity
 example #1
VOL
HI LO STOCK DIV YLD% CLOSE NETCHG
(100s)

120 105 GGG 3.5 2.8 4050 118.50 -0.50

16 12 HHH 0.9 1.1 1070 15.80 0.10

Find the following for Stocks GGG and HHH:

1. The lowest price of the stock for the last 52 weeks
2. Dividend per share last year
3. Annual percentage yield last year
4. Closing price in the last trading day
5. Closing price the day before the last trading day
 example #1
For Stock GGG:
1. Lowest Price = P105.00
2. Dividend per share =
P3.50
3. YLD% = 2.8%
4. Closing Price = P118.50
5. Closing Price (the day
before the last trading
day) = P118.50 + P0.50 =
P119.00
For Stock HHH:
1. Lowest Price = P12.00
2. Dividend per share =
P0.90
3. YLD% = 1.1%
4. Closing Price = P15.80
5. Closing Price (the day
before the last trading
day) = P15.80 - P0.10 =
P15.70
P O S T - A C T I V T Y