LET’S

EXPLORE!
Your grandparents gave you
₱175,000.00 on your 16th birthday. You
were instructed to invest the money so
that the earnings can be used to pay for
your tuition fee in college. Having heard
about the risks and rewards of the stock
market from your parents, you become
interested in buying stocks in a
particular company.
OPTION 1: Company ABC’s selling
stock is ₱1,500.00 per
share which will have a
dividend of ₱200.00 per
year. The stock can be
sold after two years at
₱2,000.00 and the market
requires a rate of return
of 15%.
OPTION 2: Company XYZ’s selling
stock is ₱1,000.00 per
share which will have a
dividend of ₱180.00 per
year. The stock can be
sold after two years at
₱2,000.00 and the
market requires a rate
of return of 7%.
 In which
company will
you invest your
money? Why?
BASIC CONCEPT OF
STOCKS AND BONDS
LESSON 4
SESSION OBJECTIVES:
01 02
Define and illustrate Distinguishes between
stocks and bonds. stocks and bonds.
03 04
Describes the different Analyzes the different
markets of stocks and markets of stocks and
bonds. bonds.
STOCKS
Is it possible for you to be
part owners of the big
companies in the
Philippines like Ayala
Corp., Metropolitan Bank,
and Trust Co., Manila
Electric Co., and the like?
 LUKE’S COMPANY

𝟏
𝟏𝟎

10 STOCKS
 WHAT ARE
STOCKS?
Stocks are shares in the
ownership of the
company or corporation.
 Definition Of Terms In Relation
To Stocks
Dividend – share in the company’s profit.

Dividend per Share – ratio of the dividends to the number of

shares

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)
 Definition Of Terms In Relation
To 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 the market value, it is determined by the
company and remains stable over time
Certificate Shareholder or Stockholder
Number

Number
Corporation
Issuing
of
the Shares
Certificates

Par
Value Signatures of the Corporation
 Formulas:
𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
• 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒𝑠

• 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 =
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 x 𝑃𝑎𝑟 𝑉𝑎𝑙𝑢𝑒 x 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒

• 𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
SCENARIOS RELATED TO STOCKS
1. Five years ago, Ms. Salceda bought 500 shares of
stocks in a certain corporation worth Php 48.00
each. Now, each share is worth P60.50.
2. Mr. Tagle bought 1,000 shares of stocks in a
corporation that had issued 100,000 shares.
This means Mr. Tagle acquired 1% of the total
shares.
3. A certain corporation declared to give Php
100,000,000 dividend to the common
stockholders. If there are 1,000,000 shares,
then there will be Php 100 dividend per share.
EXAMPLES IN RELATION TO STOCKS
Example 1:
A certain financial institution declared a
Php 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?
SOLUTION:
GIVEN:
• Total Dividend = Php 30,000,000.00
• Total Shares = Php 700,000.00
FIND:
Dividend per Share = ?
SOLUTION:
𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒𝑠
30,000,000
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
700,000
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 = 𝑷𝒉𝒑 𝟒𝟐. 𝟖𝟔
Therefore, the dividend per share is ₱42.86
 Example 2:
A certain corporation declared a 3%
dividend on a stock with a par value
of ₱500.00. Mrs. Lingan owns 200
shares of stock with a par value of
₱500.00. How much is the dividend
she received?
SOLUTION:
GIVEN:
• Dividend Percentage = 3%
• Par Value = Php 500.00
• Number of Shares = 200
FIND:
Dividend = ?
SOLUTION:
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅
= 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝑷𝒆𝒓𝒄𝒆𝒏𝒕𝒂𝒈𝒆 𝒙 𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆 𝒙 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑺𝒉𝒂𝒓𝒆𝒔

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = (𝟎. 𝟎𝟑)(𝟓𝟎𝟎)( 𝟐𝟎𝟎)

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = 𝐏𝐡𝐩 𝟑, 𝟎𝟎𝟎
Therefore, the dividend is ₱3,000
 Example 3:
Corporation A, with a current market value
of ₱52.00, gave a dividend of ₱8.00 per
share for its common stock. Corporation B,
with a current market value of ₱95.00,
gave a dividend of ₱12.00 per share. Use
the stock yield ratio to measure how much
dividends shareholders are getting in
relation to the amount invested.
 SOLUTION:
CORPORATION A
GIVEN:
• Total Dividend = Php 8.00
• Market Value = Php 52.00
FIND:
Stock Yield Ratio = ?
 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
8
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
52
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 0.1538
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 𝟏𝟓. 𝟑𝟖%
 SOLUTION:
CORPORATION B
GIVEN:
• Total Dividend = Php 12.00
• Market Value = Php 95.00
FIND:
Stock Yield Ratio = ?
 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
12
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
95
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 0.1263
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 𝟏𝟐. 𝟔𝟑%
 Conclusion:
Corporation A has a higher stock
yield ratio than Corporation B. Thus,
each peso will earn you more if you
invest in Corporation A than B. If all
things are equal, then it is wiser to
invest in Corporation A.
 Let’s try this! (1)
A certain financial institution
declared a Php 10,000,000
dividend for the common stocks.
If there are a total of 500,000
shares of common stock, how
much is the dividend per share?
 Solution:
𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒𝑠
10,000,000
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
500,000
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 = 𝟐𝟎
Therefore, the dividend per share is ₱20
 Let’s try this! (2)
A certain corporation declared a
5% dividend on a stock with a
par value of Php 700. Mrs. Cruz
owns 300 shares. How much is
the dividend she received?
 Solution:
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅
= 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝑷𝒆𝒓𝒄𝒆𝒏𝒕𝒂𝒈𝒆 𝒙 𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆 𝒙 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑺𝒉𝒂𝒓𝒆𝒔

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = (𝟎. 𝟎𝟓)(𝟕𝟎𝟎)( 𝟑𝟎𝟎)

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = 𝐏𝐡𝐩 𝟏𝟎, 𝟓𝟎𝟎
Therefore, the dividend is ₱10,500
 Let’s try this! (3)
With a current market value of Php 60,
Corporation X gave a dividend of Php 9 per
share for its common stock. Corporation Y,
with a current market of Php 85, gave a
dividend of 12 per share. Use the stock yield
ratio to measure how much dividends
shareholders are getting in relation to the
amount invested.
 Solution: (Corporation X)
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
9
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
60
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 0.15
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 𝟏𝟓%
 Solution: (Corporation Y)
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
12
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 =
85
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 0.1412
𝑺𝒕𝒐𝒄𝒌 𝒀𝒊𝒆𝒍𝒅 𝑹𝒂𝒕𝒊𝒐 = 𝟏𝟒. 𝟏𝟐%
 Conclusion:
Corporation X, has a higher stock
yield ratio than Corporation Y.
Thus, each peso will earn you
more if you invest in Corporation
X than in Corporation Y.
BONDS
Have you ever
thought you could
fund big companies
or even the
government?
Bond Holder
𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒 = 𝑃ℎ𝑝 1,000,000
𝑀𝑎𝑡𝑢𝑟𝑖𝑡𝑦 = 10 𝑦𝑒𝑎𝑟𝑠
𝐶𝑜𝑢𝑝𝑜𝑛 𝑅𝑎𝑡𝑒 = 5%
INVESTOR – “LENDER”
 WHAT ARE BONDS?
Bonds are interest-bearing
security that promises to pay the
amount of money on
a certain maturity date as stated
in the bond certificate.
 Definition Of Terms In Relation
To Bonds
Price – the price of the bond is the amount at which the right
to receive the face value at the maturity date is bought. It is
denoted by P.

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.
 Definition Of Terms In Relation
To Bonds
Face Value or Par Value – the predetermined
amount that the owner of the bond will receive at 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 a
premium.
 Definition Of Terms In Relation
To 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.

Fair Price of a Bond – the present value of all cash

inflows to the bondholder
 Formulas:
o 𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏𝒔 𝑨𝒎𝒐𝒖𝒏𝒕
= 𝑭𝒂𝒄𝒆 𝑽𝒂𝒍𝒖𝒆 𝒙 𝑪𝒐𝒖𝒑𝒐𝒏 𝑹𝒂𝒕𝒆
o 𝑺𝒆𝒎𝒊 − 𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏 𝑨𝒎𝒐𝒖𝒏𝒕
𝟏
= 𝒐𝒇 𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏𝒔 𝑨𝒎𝒐𝒖𝒏𝒕
𝟐
o 𝑨𝒎𝒐𝒖𝒏𝒕 𝒐𝒇 𝑺𝒆𝒎𝒊 − 𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏
𝒄𝒐𝒖𝒑𝒐𝒏 𝒓𝒂𝒕𝒆
o = 𝒇𝒂𝒄𝒆 𝒗𝒂𝒍𝒖𝒆 𝒙 ( )
𝒑𝒂𝒚𝒂𝒃𝒍𝒆 𝒑𝒆𝒓𝒊𝒐𝒅
 Formulas:
o𝑴𝒂𝒓𝒌𝒆𝒕 𝑷𝒓𝒊𝒄𝒆 = 𝑩𝒐𝒏𝒅 𝑷𝒓𝒊𝒄𝒆 𝒙 𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆
𝟏− 𝟏+𝒊 −𝒏
o 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 = 𝑹
𝒊
𝑭
o 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 =
(𝟏+𝒊)𝒏
o 𝑬𝒒𝒖𝒊𝒗𝒂𝒍𝒆𝒏𝒕 𝑨𝒏𝒏𝒖𝒂𝒍 𝑴𝒂𝒓𝒌𝒆𝒕 𝑹𝒂𝒕𝒆 𝒕𝒐 𝑺𝒆𝒎𝒊 −
𝒎𝟐
𝒊 𝒎𝟏
𝒂𝒏𝒏𝒖𝒂𝒍 𝑹𝒂𝒕𝒆 𝒊 = 𝟏 + −𝟏
𝒎
 Formulas:
o 𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒏 𝒃𝒐𝒏𝒅𝒔
= 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒃𝒐𝒏𝒅𝒔 𝒙 𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆
o 𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆
= 𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒃𝒐𝒏𝒅𝒔 𝒙 𝒓𝒂𝒕𝒆 𝒙 𝒕𝒊𝒎
o 𝑨𝒎𝒐𝒖𝒏𝒕 𝑰𝒏𝒗𝒆𝒔𝒕𝒆𝒅
= (𝑴𝒂𝒓𝒌𝒆𝒕 𝑷𝒓𝒊𝒄𝒆) + 𝑪𝒐𝒎𝒎𝒊𝒔𝒔𝒊𝒐𝒏
o 𝑹𝒂𝒕𝒆 𝒐𝒇 𝑰𝒏𝒄𝒐𝒎𝒆
= 𝑨𝒏𝒏𝒖𝒂𝒍 𝒊𝒏𝒄𝒐𝒎𝒆 ÷ 𝑨𝒎𝒐𝒖𝒏𝒕 𝑰𝒏𝒗𝒆𝒔𝒕𝒆𝒅
 SCENARIOS RELATED TO BONDS
1. Ms. Ante bought a 10% bond for Php 100,000. After years,
she receives Php 100,000 back. She also receives
(𝑃ℎ𝑝 100,000)(0.10)
= 𝑃ℎ𝑝 5,000 every six months for 10
2
years.

2. Mr. dela Cruz is offered an 8% bond for Php 50,000. The

bond has a face value of Php 50,000 with maturity date
(𝑃ℎ𝑝 50,000)(0.08)
exactly 5 years from now. He receives
2
every six months for 5 years.
 Example 1
Determine the amount of the
semi-annual coupon for a bond
with the face value of Php
250,000 that pays 10%, payable
semi-annually for its coupons.
 SOLUTION:
GIVEN:
• Face Value = Php 250,000
• Coupon Rate = 10%
FIND:
Amount of Semi-annual coupons = ?
SOLUTION:
𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏𝒔 𝑨𝒎𝒐𝒖𝒏𝒕
= 𝐹𝑎𝑐e Value x 𝐶𝑜𝑢𝑝𝑜𝑛 𝑅𝑎𝑡𝑒
= 250,000 x 0.10
𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏 𝑨𝒎𝒐𝒖𝒏𝒕 = 𝟐𝟓, 𝟎𝟎𝟎
𝑺𝒆𝒎𝒊 − 𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏 𝑨𝒎𝒐𝒖𝒏𝒕
𝟏
Therefore, the dividend
= 𝟐𝟓, 𝟎𝟎𝟎 = 𝟏𝟐, 𝟓𝟎𝟎
is ₱3,000
𝟐
 Example 2
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
rate is 4%.
 SOLUTION:
GIVEN:
• Face Value = Php 100,000
• Coupon Rate = 5%; payable semi-annually
• Time of maturity = 10 years
• Number of periods = 2(10) = 20
• Market Value= 4% or 0.04
 SOLUTION:
✓ Amount of Semi – Annual Coupons
o 𝑨𝒎𝒐𝒖𝒏𝒕 𝒐𝒇 𝑺𝒆𝒎𝒊 − 𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒖𝒑𝒐𝒏
𝑐𝑜𝑢𝑝𝑜𝑛 𝑟𝑎𝑡𝑒
= 𝑓𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 𝑥 ( )
𝑝𝑎𝑦𝑎𝑏𝑙𝑒 𝑝𝑒𝑟𝑖𝑜𝑑
0.05
= 100,000 𝑥 ( )
2
= 𝑷𝒉𝒑 𝟐, 𝟓𝟎𝟎
 SOLUTION:
✓ Present Value → Equivalent Rate
→ Present Value → Price (Fair Value)
𝐹
o 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 =
(1+𝑖)𝑛
100,000
=
(1 + 0.04)10
𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 = 𝑷𝒉𝒑 𝟔𝟕, 𝟓𝟓𝟔. 𝟒𝟐
 SOLUTION:
✓ Present Value → Equivalent Rate
→ Present Value → Price (Fair Value)
𝑚2
𝑖 𝑚1
o 𝒊= 1+ −1
𝑚
1
0.04 2
= 1+ −1
1

𝒊 = 𝟎. 𝟎𝟏𝟗𝟖𝟎𝟑𝟗
 SOLUTION:
✓ Present Value → Equivalent Rate
→ Present Value → Price (Fair Value)
1− 1+𝑖 −𝑛
o 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 = 𝑅
𝑖
−20
1 − 1 + 0.0198039
= 2,500
0.0198039

𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 = 𝑷𝒉𝒑 𝟒𝟎, 𝟗𝟓𝟔. 𝟎𝟓

 SOLUTION:
✓ Present Value → Equivalent Rate
→ Present Value → Price (Fair Value)
o 𝑷𝒓𝒊𝒄𝒆
= 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑉𝑎𝑙𝑢𝑒1 + 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑉𝑎𝑙𝑢𝑒2
= 67,556.42 + 40,956.05
𝑷𝒓𝒊𝒄𝒆 = 𝑷𝒉𝒑 𝟏𝟎𝟖, 𝟓𝟏𝟐. 𝟒𝟕
 Example 3
Mrs. Go owns 45 bonds with a
par value of ₱1,000 each and
pays 8 ½% interest. What
annual income does Mrs. Go
get from these bonds?
 SOLUTION:
GIVEN:
• Number of Bonds = 45
• Rate = 8 ½ % or 0.085
• Par Value = 1,000
FIND:
• Annual Income
 SOLUTION:
FIND:
✓Par Value of n Bonds
o 𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒏 𝒃𝒐𝒏𝒅𝒔
= 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑏𝑜𝑛𝑑𝑠 𝑥 𝑃𝑎𝑟 𝑉𝑎𝑙𝑢𝑒
= (45) ( 1,000)
𝑷𝒂𝒓 𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒏 𝒃𝒐𝒏𝒅𝒔 = 𝑷𝒉𝒑 𝟒𝟓, 𝟎𝟎𝟎
 SOLUTION:
FIND:
✓Annual Income
o 𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 =
𝑝𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑏𝑜𝑛𝑑𝑠 𝑥 𝑟𝑎𝑡𝑒 𝑥 𝑡𝑖𝑚𝑒
= (45,000) (0.085)(1)
𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 = 𝑷𝒉𝒑 𝟑, 𝟖𝟐𝟓
 Example 4
Find the yield on
₱1,000.00, 9% ACTS
bond priced at 94 plus
₱10 commission.
 SOLUTION:
GIVEN:
• Par Value= Php 1,000
• Rate = 9% or 0.09
• Comission = Php 10
FIND:
• Yield (rate of income)
 SOLUTION:
FIND:
✓Annual Income
o 𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 =
𝑝𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑏𝑜𝑛𝑑𝑠 𝑥 𝑟𝑎𝑡𝑒 𝑥 𝑡𝑖𝑚𝑒
= (1,000) (0.09)(1)
𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 = 𝑷𝒉𝒑 𝟗𝟎
 SOLUTION:
FIND:
✓Amount Invested
o 𝑨𝒎𝒐𝒖𝒏𝒕 𝑰𝒏𝒗𝒆𝒔𝒕𝒆𝒅
= (𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒) + 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛
= 0.94 𝑥 1,000 + 10
𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 = 𝑷𝒉𝒑 𝟗𝟓𝟎
 SOLUTION:
FIND:
✓Rate of Income
o 𝑹𝒂𝒕𝒆 𝒐𝒇 𝑰𝒏𝒄𝒐𝒎𝒆
= 𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑐𝑜𝑚𝑒 ÷ 𝐴𝑚𝑜𝑢𝑛𝑡 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑
= 90 ÷ 950
𝑹𝒂𝒕𝒆 𝒐𝒇 𝑰𝒏𝒄𝒐𝒎𝒆 = 𝟗. 𝟒𝟕%
 STOCKS VS BONDS
BASIS FOR
STOCKS BONDS
COMPARISON
DEFINITION A form of equity A form of debt instrument
instrument or raising or raising of money by
money by allowing borrowing from investors.
investors to be part
owners of the company.

ISSUERS Corporates Government Institutions,

Financial Institutions,
Companies etc.
 STOCKS VS BONDS
BASIS FOR
COMPARISON
STOCKS BONDS
Status of Shareholders are Bondholders are the
Holders the owners of the lenders to the
company. company.
Form of Profits earned by the Interest payments are
Returns company are paid in made in the form of
the form of Coupon Payments.
Dividends.
 STOCKS VS BONDS
BASIS FOR
COMPARISON
STOCKS BONDS
Risk Level The risk level is high The risk level is
since it depends relatively low since
upon the bondholders are
performance of the prioritized for
issuer, so no repayments.
guaranteed returns.
Major risk Market Risk, Interest Rate Risk,
Associated Business Risk Inflation Risk
 STOCKS VS BONDS
BASIS FOR
COMPARISON
STOCKS BONDS
Additional Shareholders get the Bondholders get the
Benefit right to vote. preference in terms of
repayment and on
liquidation.
Market Value When interest rates When market interest
fall significantly, the rates decrease, the
market stock value market value of an
rises. existing bond
increases.