Chapter 3
Stocks and Bond
Content Standards
➢ The learner demonstrates understanding of key concepts of stocks and bonds
Performance Standards
The learner is able to,
➢ Investigate, analyze and solve problems involving stocks and bonds
Learning Competencies
The learner,
➢ Illustrates stocks and bonds
➢ Distinguishes between stocks and bonds
➢ Describe the different markets for stocks and bonds
➢ Analyze the different market indices for stocks and bonds
Discussion
Stocks vs Bonds
Stocks Bonds
This allows investors to be part of the company. A form of debt financing or raising money from
Shareholders become co-owners of the company. borrowing from many investors (bond holders)
Stock prices vary daily. The stock market is the Bond holders are given interest payments for the
organization where stock values can be taken from. investment they have given the company.
Earning from stocks can be a little risky as the The uncertainty comes in the ability of the bond issuer to
shareholders can only earn if the stock prices go up. Once pay the bond holders the face value of their investment as
the stock prices go down, they lose money as their shares well as the interest for the money loaned to them. The
are worth less than what they paid for. government usually issues bonds and their ability to pay
their bond holders back would be greater as they
(government) have a guaranteed funding from the taxes
of the people.
Higher risks for stock traders but the possibility of higher Lower risks but the returns are also lower.
returns is also greater
Appropriate for long term investments as stockholders This is appropriate for those who needs the returns of
may opt to not sell their stocks if the prices go low and their investments soon. They cannot afford to take
wait for the prices to go up before they sell. chances on the stock market.
Stock Markets
1. Dividends – these are the shares in a company’s profit. Companies who issue bonds and stocks give dividends to
their investors.
2. Dividend per share – this is the ratio of the dividends to the number of shares of a stock or bond holder. This is
given by the equation .
𝒕𝒐𝒕𝒂𝒍 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆 =
𝒕𝒐𝒕𝒂𝒍 𝒔𝒉𝒂𝒓𝒆𝒔
3. Stock Market – this is a place where stocks can be bought. We have the Philippine Stock Exchange (PSE) here in
the country.
4. Market Value – this is the current price of a stock at which it can be sold in the stock market.
5. Stock Yield Ratio – this is the ratio of the annual dividend per share and the market value per share. This is given
by the equation .
𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
𝒔𝒕𝒐𝒄𝒌 𝒚𝒊𝒆𝒍𝒅 𝒓𝒂𝒕𝒊𝒐 =
𝒎𝒂𝒓𝒌𝒆𝒕 𝒗𝒂𝒍𝒖𝒆
6. Par Value (for Stocks) – this is the per share amount as stated in the certificate given by the company to their
shareholders.
𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
𝒑𝒂𝒓 𝒗𝒂𝒍𝒖𝒆 =
𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓𝒄𝒆𝒏𝒕𝒂𝒈𝒆
7. Face Value (for Bonds) – amount payable on the maturity date of a bond. (F)
8. Coupons – these are periodic interest payments that the bond holder receives until the maturity of the bond
certificate. These are usually given semi-annually.
9. Coupon Rate – the rate of coupon payment period.
10. Price of a Bond – the price of the bond upon purchase.
11. Term of a Bond – this is the number of years before a bond certificate matures.
12. Fair Price of a Bond – present value of all cash inflow of the bondholder.
Sample Problem
1. If a company declared a Php 10,000,000.00 dividend for the common stocks and there are 100,000 shares of common
stocks, how much is the dividend per share?
𝑡𝑜𝑡𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
Formula: 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 =
𝑡𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒𝑠
Given: total dividend = P10,000,000.00 total shares = 100,000.
Solution:
2. A corporation declared a 2% dividend on stock with a par value of Php 1,000.00. If your mother bought 300 shares,
how much will be the dividend she will receive?
𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Formula: 𝑝𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 = 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 → 𝑝𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 × 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 % = 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Given: par value = P1,000.00 total shares = 300 percentage dividend = 2% = 0.02
Solution:
3. A certain financial institution declared P30,000,000.00 dividend for the common stocks. If there are a total of 700,000
shares of common stocks, how much is the dividend per share?
𝑡𝑜𝑡𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
Formula: 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 = 𝑡𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒𝑠
Given: total dividend = P30,000,000.00 total shares = 700,000.
Solution:
4. A certain corporation declared a 3% dividend on a stock with a par value of P500.00. Mrs. Dela Cruz owns 200 shares
of stocks with par value of P500.00. How much is the dividend she received?
𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Formula: 𝑝𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 = 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 → 𝑝𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 × 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 % = 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Given: par value = P500.00 total shares = 200 percentage dividend = 3% = 0.03
Solution:
5. Corporation A, with a current market value of P52.00, gave a dividend of P8.00 per share for its common stock.
Company B, with a current market value of P95.00, gave a dividend of P12.00 per share. Use the stock yield ratio to
measure how much dividends shareholder are getting in relation to the amount invested.
𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Formula: 𝑠𝑡𝑜𝑐𝑘 𝑦𝑖𝑒𝑙𝑑 𝑟𝑎𝑡𝑖𝑜 = 𝑚𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒
Given: Company A: market value = P52.00 Company B: market value = P95.00
Dividend per share = P8.00 Company dividend per share = P12.00
Solution:
Quarter 2
Class #
Written Work #F3
Name: _____________________________________________ Score: __________________
USN: _________________ Section: ______________________ Date: __________________
Read carefully the following questions. Solve what is asked on the problem. Show your complete solution and box the final
answer with red-ink pen. Erasures are not allowed.
1. A land developer declared a dividend of P10,000,000.00 for its common stock. Suppose there are P600,000.00 shares
of common stock, how much is the dividend per share?
2. 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?
3. A certain financial institution declared a ₱40,000,000.00 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?
