STOCKS

DEFINITION OF TERMS
Stocks – share in the ownership of a company.
Dividends – share in the company’s profit.

Dividend Per Share – ratio of the dividends to

the number of shares.
DEFINITION OF TERMS
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).
Market Value – the current price of a stock at
which it can be sold.
DEFINITION OF TERMS
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.
1. A certain financial institution declared
a P30,000,000 dividend for the common
stocks. If there are a total of P700,000
shares of common stock, how much is
the dividend per share.
1. A certain financial institution declared a P30,000,000
dividend for the common stocks. If there are a total of
P700,000 shares of common stock, how much is the
dividend per share.
GIVEN: Total Dividend = P30,000,000
Total Shares = P700,000
FIND:
DIVIDEND PER SHARE = = = P42. 86

Therefore, the dividend per share is P42.86

2. A certain corporation declared a 3%
dividend on a stock with a par value of P500.
Mrs. Lingan own 200 shares of stocks with par
value of P500. How much is the dividend she
received.
2. A certain corporation declared a 3% dividend on a stock with a par
value of P500. Mrs. Lingan own 200 shares of stocks with par value of
P500. How much is the dividend she received.
GIVEN:
Dividend Percentage = 3% Number of shares = P200
Par Value = P500

FIND THE DIVIDEND:

The dividend per share is: P500 x 0.03 = P15
Total dividend is P15 per share x 200 shares = P3,000
2. A certain corporation declared a 3% dividend on a stock with a par
value of P500. Mrs. Lingan own 200 shares of stocks with par value of
P500. How much is the dividend she received.
GIVEN:
Dividend Percentage = 3% Number of shares = P200
Par Value = P500

FIND THE DIVIDEND:

Dividend = (Dividend Percentage) (Par Value) (No. of Shares)

= (0.03) (500) (200)
= 3,000
3. Corporation A, with a current market value of P52,
gave a dividend of P8 per share for its common stock.
Company B, with a current market value of P95, gave a
dividend of P12 per share. Use the stock yield ratio to
measure how much dividends shareholders are getting in
relation to the amount invested.
3. Corporation A, with a current market value of P52, gave a dividend
of P8 per share for its common stock. Company B, with a current
market value of P95, gave a dividend of P12 per share. Use the stock
yield ratio to measure how much dividends shareholders are getting in
relation to the amount invested.
GIVEN:
Corporation A: Corporation B:
Dividend per share = P8 Dividend per share = P12
Market Value = P52 Market Value = P95
FIND: Stock yield ratio FIND: Stock yield ratio
= = 0.1538 = 15.38% = = 0.1263 = 12.63%
BONDS
DEFINITION TERMS
Bond – interest –bearing security which promises to pay
(1) a stated amount of money on the maturity date, and
(2) regular interest payments called coupons

Coupon – periodic interest payment that the bondholder

receives during the time between purchase date and maturity
date; usually received semi-annually.
DEFINITION TERMS
Coupon rate – the rate per coupon payment period, denoted r
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
DEFINITION TERMS
Term 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 Bond – Present value of all cash inflows to the

bondholder.
EXAMPLE 1:

Determine the amount of the semi-annual coupon for a

bond with a face value of P300,000 that pays 10%,
payable semi-annually for its coupons.
GIVEN
Face Value F = 300,000
Coupon rate r = 10%

FIND: Amount of the semi-annual coupon

Annual coupon amount: 300,000 (0.10) = 30,000

Semi-annual coupon amount : = 15,000

Thus, the amount of the semi-annual coupon is P15,000

Note: The coupon rate is used only for computing
the coupon amount, usually paid semi-annually. It
is not the rate at which money grows. Instead,
current market conditions are reflected by the
market rate and is used to compute the present
value of the future payments.
2. Suppose that a bond has a face value of
P100,000 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%.
2. Suppose that a bond has a face value of P100,000 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%.
Present Value of 100,000
GIVEN:
Coupon rate r = 5%, payable semi-annually
P = = = 67, 556. 42
Face value = 100,000
Time of maturity = 10 Present value of 20 payments of 2,500 each
𝑚1 1
Number of periods = 2 (10) = 20 𝑚2 2
) -1 = (1 + ) -1 = 0.01980390
Market rate = 4%
Amount of semi-annual coupon
= 2,500 () = 40,956.05
= 100,000 () = 2,500
FAIR PRICE = 67,556.42 + 40, 956.05 = 108,512.47
 MARKET INDICES
FOR
STOCKS AND BONDS
STOCK MARKET INDEX
A stock market index is a measure of a
portion of the stock market.
EXAMPLE

One example is the PSE Composite Index or PSEi. It is

composed of 30 companies carefully selected to
represent the general movement of market prices. The
up and down movement in percent change over time
can indicate how the index is performing.
Sector indices, indices that representing a particular sector.

EXAMPLES:
Financial institutions
Service corporations
Industrial corporations

Holding firms Mining/Oil, property

The stock index can be a standard by which
investors can compare the performance of
their stocks.
Stock indices are reported in the business section of magazines
or newspapers, as well as online.
Value – it refers to the value of
index.
Chg – change of the index value
from the previous trading day
(the difference between the
value today and value yesterday)
%Chg – ratio of Chg to Val (Chg divided
by Val)
STOCK TABLES

The heading STOCK is a three-letter symbol the company is using for trading.
Example AAA

The heading 52-WK-HI is the highest selling price of the stock in the past 52
weeks. The highest price at which AAA stock traded during the past 52 weeks was
P94.

The heading DIV is the dividend per share last year.

 The heading 52-WK-LOW is the lowest selling price of the stock in the past 52
weeks. The lowest price at which AAA stock traded during the past 52 weeks was
P44.

The heading HI is the highest selling price of the stock on the last trading day.
The selling price of AAA stock in the last trading day was P60.

The heading LO is the lowest selling price of the stock on the last trading day.
The selling price of AAA stock in the last trading day was P35.5
 The heading VOL is the number of shares (in hundreds) traded in the last trading
day. In this case, stock AAA sold 2050 shares of 100 which is equal to 205,000
shares.

The heading CLOSE is the closing price on the last trading days. The closing price
of AAA stock in the last trading day was P57.29.

The heading NETCHG is the net change between the last two trading days. In
the case AAA, the net change is 0.10. The closing price is the day before the last
trading day is P57.29 – 0.10 = P57.19.
EXAMPLE 1:
Given the stock table, answer the following questions.

FOR STOCK GGG

1. What was the lowest price of the stock for the last 52 weeks? P105.00

2. What was the dividend per share last year? P3.50

3. What was the annual percentage yield last year? 2.8%

EXAMPLE:
Given the stock table, answer the following questions.

FOR STOCK GGG

4. What was the closing price in the last trading day? P118.50
5. What was the closing price the day before the last trading day?
118.50 – (-0.50) = P118.50 + 0.50 = P119.00
BUYING OR SELLING STOCKS
To buy or sells stocks, one may go to the PSE personally.

BID SIZE – the number of individual buy

orders and the total number of shares
they wish to buy.

BID PRICE – the price that buyers are

willing to pay for the stock.

ASK SIZE – how many individual sell orders

ASK PRICE – the price that the sellers of have been placed in the online platform and
the stock are willing to sell the stock. the total number of shares these sellers wish
to sell.
 Look at the table above, the first
row under Bid means that there
are a total of 122 traders who
wish to buy a total of 354,000
shares at P21.60 per share.

On the other hand, the first row under Ask means that just one
trader is willing to sell his/her 20,000 shares at a price of P21.80
per share.
BOND MARKET INDICES
- a measure of a portion of a bond market.

The main platform for bonds or fixed income

securities in the Philippines is the Philippine
Dealing and Exchange Corporation (or PDEx).
GOVERNMENT BONDS
- are sold out to banks and other brokers and dealers every
Monday by the Bureau of Treasury. It depends on their terms
(or tenors), these bonds are also called treasury bills (t-bills),
treasury notes (t-notes), or treasury bonds (t-bonds). On the
day right after the auction, the news agencies normally
reported the resulting coupon rates and the total amount sold
for these bonds.
 EXAMPLE 2.
Rachel owns 2,000 shares of company A at P980 per share. She also owns
15,000 shares for company B at P250 per share. In which company is the
total value of her share greater? Explain how you know which is greater.

COMPANY A COMPANY B
No. of shares x Selling Price = Total Price No. of shares x Selling Price = Total Price
2,000 x P980 = P1,960,000 15,000 x P250 = P3,750,000

Therefore, the greater value of her share is in company B with 15,000 at

P250 per share, its total value is P3,750,000.