GENERAL

EMATI CS
MATH
e dr i c k P. Roque
C CHER
TEA
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Lesson 5

ND BONDS
STOCKS A

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Objectives:
1. Illustrate stocks and bonds
2. Distinguish between stocks and bonds.
3. Describes the different markets for stocks
and bonds.
4. Analyzes the different market indices for
stocks and bonds
Read carefully the lyrics of the song, you may
sing the song in the tune of
“Row, row, row your boat” to emphasize how
people can save with stocks and bonds.
 STOCKS
I. Stocks, AND
stocks, stocks BONDS
are shares
That pays a dividend.
Gradually, gradually, gradually, gradually
Investing then you earn.

II. Stocks, stocks, stocks, they change

The price goes low or high.
Gradually, gradually, gradually, gradually
Money goes round and round.

III. Bonds, bonds, bonds are loans

That pay an interest
Gradually, gradually, gradually, gradually
Growing while you wait.
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 NTI AT I NG
DIFFERE O N DS
N D B
STOCKS A

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 STOCKS
• A form of equity financing or raising money by allowing
investors to be part owners of the company.
• Stocks prices vary every day. These prices are reported in
various media (newspaper, TV, internet, etc.)

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 STOCKS
• Investing in stock involves some uncertainty. Investors can
earn if the stock prices increase, but they can lose money if
the stock prices decrease or worse, if the company goes
bankrupt.
• Higher risk but with possibility of higher returns.

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 STOCKS
• Can be appropriate if the investment is for the long term
(10 years or more). This can allow investors to wait for
stock prices to increase if ever they go low.

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EXAMPLE OF STOCKS IN THE
PHILIPPINES

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

• Investors are guaranteed interest payments and a return of

their money at the maturity date.

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 BONDS
• Uncertainty comes from the ability of the bond issuer to
pay the bondholders. Bonds issued by the government
pose less risk than those companies because the
government has guaranteed funding (taxes) from which it
can pay its loans.

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 BONDS
• Lower risk, but lower yield.
• Can be appropriate for retirees (because of the guaranteed
fixed income) or for those who need the money soon
(because they cannot afford to take a chance at the stock
market)

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 Definition of Terms (STOCKS)
Stocks – share in ownership of a company.
Dividend – share in the company’s profit.
Dividend per share – ratio of the dividend to the number of
share.
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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 Definition of Terms (STOCKS)
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.
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 EXAMPLE: STOCKS
Mon
Example 1
A certain institution declared a
Solution:
Example 1
P30,000,000 dividend for the
Example 2
common stocks. If there are a
Solution:
Example 2
total of 70,000 shares of common
stock, how much is the dividend
per share?
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 SOLUTION
Mon

Example 1 Given:
Solution:

Total Dividend – P30,000,000

Example 1

Example 2

Solution: Total Shares – 700,000

Example 2
Find: Dividend per Share

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 SOLUTION
Mon

Example 1 Dividend per share

Solution:
Example 1
Dividend per share =
Example 2
=
Solution:
Example 2
= 42.86
Therefore, the dividend per share is P42.86.

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 EXAMPLE: STOCKS
Mon
Example 1

Solution:
A certain corporation declared a 3%
Example 1
dividend on a stock with value of
Example 2
P500. Mrs. Lingan owns 200 share of
Solution:
Example 2 stock with a par value of P500. How
much is the dividend she received?

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 SOLUTION
Mon

Example 1 Given:
Solution: Dividend Percentage = 3%
Example 1

Example 2
Par Value = P500
Solution:
Number of Shares = 200
Example 2

Find: Dividend

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 SOLUTION
Mon

Example 1 Dividend
Solution:
Example 1
Dividend = Dividend Percentage x Par Value
Example 2
x Number of Shares
Solution:
Example 2
= (0.03)(500)(200)
= 3,000
The dividend per share is 500 x 0.03 = 15. Since
there are 200 shares,
Thus, the dividend is P3,000.
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 Definition of Terms (BONDS)
Bond – interest-bearing security which promise to pay
• A stated amount of money on the maturity date, and
• Regular interest payments called coupons
Coupon – periodic interest payment that the bondholder received during
the time between purchase date and maturity date; usually received semi-
annually.
Coupon Rate – the rate per coupon payment period; denoted by r.

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 Definition of Terms (BONDS)
Price of a Bond – the price of the bond at 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
Fair Price of a Bond - present value of all cash inflows to the
bondholder

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 Definition of Terms (BONDS)
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.

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 EXAMPLE: BONDS
Mon
Example 1
Determine the amount of the semi-
Solution:
Example 1
annual coupon for a bond with a
face value of P300,000 that pays
10%, payable semi-annually for
its coupons.

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 SOLUTION
Mon

Example 1 Given:
Solution:

Face Value, F = P300,000

Example 1

Coupon Rate, r = 10%

Find: Amount of the Semi-
Annual Coupon

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 SOLUTION
Mon

Example 1 Amount of the Coupon

Solution:
Example 1
Amount of the Coupon = F * r
= 300,000 (0.1)
= 30,000
Semi-Annual Coupon Amount = 30,000(0.5)
= 15,000
Thus, the amount of the semi-annual coupon is
P15,000.
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THANK YOU