Review

What is Annuity?
What is Deferred Annuity?
 Let’s Sing a Song in the tune of “ Row, row, row your Boat”
Stocks and Bonds
Stocks, stocks, stocks are shares
That pays a dividend.
Gradually, gradually, gradually, gradually
Investing then you earn.
Stocks, stocks, stocks, they change
The price goes low or high.
Gradually, gradually, gradually, gradually
Money goes round and round.
Bonds, bonds, bonds are loans
That pay an interest
Gradually, gradually, gradually, gradually
Growing while you wait.
Questions to Ponder
1. Based on the given song, can
you define stocks? How about
bonds?
2. Distinguish the difference
between stocks and bonds?
3. Between stocks and bonds,
which do you prefer to invest your
money? Why?
Stocks and Bonds
 are the heartbeat of the economy.
 Much of the world's business activity would be
impossible without stocks and bonds.
 are certificates that are sold to raise money for
starting a new company or for expanding an existing
company.
 They are also called securities,
 people who buy them are called investors.
- has voting rights
- has no voting rights
instrument instrument
Philippine Stock Exchange (PSE) governed our stock market.

Stockbrokers -who specialize to work in the stock market can trade on the floor
and they receives a commission for the services of both buying and selling
stocks.
STOCKS
STOCKS
STOCKS
STOCKS
STOCKS

Dividend = P 3,000.00
STOCKS
STOCKS
STOCKS
BONDS
BONDS
Find the value of a ₱ 20,000.00 bond with interest of 14%
compounded semi-annually which is redeemable at 108%
in 5 years that yields the purchaser 6% converted semi-
annually.
Solution:
Finding the purchase price of the bond requires us to determine first the
coupon payment and the redemption value of the bond. Using the
information given in the problem, substitute the values to the respective
formulas. Thus, we have
Fv = Face Value = ₱ 20,000
𝑟𝑏= bond rate = 0.14
m = number of conversion period per year = 2
t = term = 5 years
BONDS
Find the value of a ₱ 20,000.00 bond with interest of 14%
compounded semi-annually which is redeemable at 108%
in 5 years that yields the purchaser 6% converted semi-
annually.
𝑟y= yield rate = 0.06
b = periodic bond rate = 0.14/2=0.07
n = total number of conversion period = 5(2) = 10
i = periodic rate = 0.06/2=0.03
BONDS
Find the value of a ₱ 20,000.00 bond with interest of 14%
compounded semi-annually which is redeemable at 108% in 5
years that yields the purchaser 6% converted semi-annually.
Find the value of a ₱ 50,000.00 bond with
interest of 12% compounded semi-
annually which is redeemable at 105% in 3
years that yields the purchaser 8%
converted semi-annually.
Activity

44
5
Evaluation
Multiple Choice. Choose the letter of the best answer.

1. What is another term for stock?

a. bond c. debt instrument
b. debenture d. equity instrument

2. Another term for a bond’s face value.

a. par value c. maturity
b. coupon d. final payment
Evaluation
Multiple Choice. Choose the letter of the best answer.

3. A certain corporation declared a 4.5% dividend on a stock with

a par value of ₱ 400.00. Mr. Reyes owns 100 shares of stocks with
a par value of ₱ 400.00 How much is the dividend she received?
a. ₱ 1500.00
b. ₱ 1600.00
c. ₱ 1700.00
d. ₱ 1800.00
Evaluation
Multiple Choice. Choose the letter of the best answer.

4. A certain financial institution declared a

₱ 80,000,000.00 dividend for the common stocks. If there is a
total of 500,000 shares of common stocks, how much is the
dividend per share?
a. ₱ 140.00
b. ₱ 150.00
c. ₱ 160.00
d. ₱ 170.00
Evaluation
Multiple Choice. Choose the letter of the best answer.

5. Determine the amount of the semi-annual coupon for a bond

with a face value of ₱ 450,000.00 that pays 12% payable semi-
annual for its coupon.
a. ₱ 27,000.00
b. ₱ 24,000.00
c. ₱ 21,000.00
d. ₱ 18,000.00
Answers

1. D. equity instrument
2. A. par value
3. D. P1,800.00
4. C. P160.00
5. A. P 27,000.00