Stocks and Bonds

STOCKS AND BONDS
Two Types of Stocks

• Common Stock – does not have
set dividend
• Preferred Stock – the dividend is
set by the corporation and
indicated at the time of stock
was issued
Difference Between Stocks and
Bonds
Stocks Bonds
A form of equity financing A form of debt financing,
Stock prices vary every day. Investors are guaranteed interest

payments and a return of their
Investing in stock involves some Uncertainty comes from the
uncertainty
Higher risk but with possibility of Lower risk but lower yield
higher returns
Can be appropriate if the Can be appropriate for retirees
investment is for long term
Example:
 A certain financial institution declared a
₱ 30 000 000 dividend for the common stocks. If
there are a total of 700 000 shares of common
stock, how much is the dividend per share?
Example:
 A certain corporation declared a 3% dividend
on a stock with a par value of ₱500. Mrs.
Lingan has 200 shares of a stock with par value
of ₱500. How much is the dividend she
received?
Commission
 a payment to an agent or sales person based
on the value or quantity of goods bought or
sold; broker’s or brokerage fee.
 Found by the percentage of a sale.
Example 1:
Tony sell T – Shirts on weekends. He is paid a
straight commission of 3% on his sales. In April,
his sales amounted to ₱15 000. How much was
his commission?
Example 1:
 Commission = 3% of the total sales
= 0.03 x ₱15 000
= ₱450
 Tony received ₱450 commission.
Example 2:
 Lisa received a commission of ₱ 11 000.00 on
a sale of ₱200 000.00. What was her rate of
commission?
Example 2:
 To get the rate of commission, divide the
amount of commission by the amount of sales
11 000 11
 = = 0.055 𝑜𝑟 5.5%
200000 20
Exercises:
1. How much commission did the broker get if
he charged 2% of the cost of the stock which
is ₱15 000?
2. Martin receives a 6% commission on all items
he sells. If his last week’s commission was
₱7500, what was his total sales?
Example:
 Corporation A, with a current market value of
₱52, gave a dividend of ₱8 per share for its
common stock. Corporation B, with a current
market value of ₱95, gave a dividend of ₱12
per share. Calculate the stock yield ratio.
 Corporation A = 15.38%
 Corporation B = 12.63%
Corporation A has a higher stock yield ratio
than Corporation B. Thus, each peso would
earn you more if you invest in corporation
A.
BONDS
 A form of debt financing, or raising money by
borrowing from the investors
 A form of long term investment issued by a
corporation or government where the
purchaser becomes the creditor of the
company.
Example 1:
 Determine the amount of semi – annual
coupon for a bond with a face value of
₱300, 000 that pays 10%, semi – annually for
its coupons.
Example 2
Find the amount of the semi – annual coupon
for a ₱250 000 bond which pays 7% convertible
semi – annually for its coupons.
Answer: ₱8750.00
A financial institution declared a
dividend of ₱ 75 000 000 for its
common stock. Suppose there are 900
000 shares of common stock, how
much is the dividend per share?
The ABC corporation gave out P38
dividend per share for its common
stock. The market value of the
stock is P108. Determine the stock
yield ratio?
A bank declared a dividend of P27
per share for the common stock. If
the common stock closes at P93,
how large is the stock yield ratio on
this investment?
Find the amount of the semi-
annual coupon for a P200,000
bond which pays 5% convertible
semi-annually for its coupons .
1. Stockholder A got 4500 shares of stocks from XYZ
Corporation. The par value is P 150. How much is the
dividend if the percentage is 3%?
2. Mr. Roman purchased 1000 shares of stocks at P25
par value. How much is his dividend if the percentage
declared by the company is 2%?
3. A certain land developer declared a dividend of P
23,000,000 for its common stock. Suppose there are
500,000 shares of common stock, how much is the
dividend per share?
4. A financial institution will give out a dividend of
P57,000,000 for its common stock. Suppose there are
700,000 shares of common stock, how much is the
dividend per share?
5. A resort company gave out P11 dividend per share for its
common stock. The market value of the stock is P17.
Determine the stock yield ratio.
6. A telecommunication company gave out P800 dividend per
share for its common stock. The market value of the stock is
1180. Determine the stock yield ratio.
7. Find the amount of the semi-annual coupon for a P110,000
bond which pays 4.5% convertible semi-annually for its
coupons .
8. Find the amount of the semi-annual coupon for a P25,000
bond which pays 2.5% convertible semi-annually for its
coupons .
9. A bond promises to pay the bondholder equal payments of
P6,000 in six-month intervals for 30 years. If the face amount is
P450,000, what is the fair price of the bond? Assume that the
market rate is 2% compounded annually.

Stocks and Bonds

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Read this document in other languages

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Stocks and Bonds

Uploaded by

Copyright:

Available Formats

STOCKS AND BONDS

Two Types of Stocks

A form of equity financing A form of debt financing,

Stock prices vary every day. Investors are guaranteed interest

You might also like