General Mathematics 1st Trimester, S.Y.

2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

STOCKS BONDS
I. OBJECTIVES

GOAL 1 illustrate stocks and bonds;

GOAL 2 distinguish between stocks and bonds;

GOAL 3 describe the different markets for stocks and bonds;

GOAL 4 analyze the different market indices for stocks and bonds; and

GOAL 5 interpret the theory of efficient markets.

II. DEFINITION OF TERMS

Stock is an official evidence of part-ownership of a stock company which

may be used in
claiming company’s assets and earnings. It is also known as shares or
equity.
Shareholder or Stockholders is the one who owns shares of corporation stock.
Dividend is earnings distributed to shareholders.
Dividend Per Share is a ratio of the dividends to the number of shares
Stock Market is a place where stocks can be bought or sold. It is also called the exchange. The
stock market in the Philippines is governed by the Philippine Stock Exchange (PSE).
Examples of globally-known stock markets are the New York Stock Exchange, the
NASDAQ, Nikkei and the British FTSE.
Market Price is the price at which a stock or bond is sold.
Stockbroker is a professional trader who buys and sells shares on behalf of clients.
Par Value is the per share amount as stated on the company certificate. Unlike market value, it
is determined by the company and remains stable over time.
Preferred stock is one of the two kinds of stocks. Preferred stock owners are guaranteed a fixed
dividend for as long as they own the stock. Preferred stockholders are given some
extent of ownership of the company but usually do not enjoy the same voting right as
the common stockholders. The statement of voting right for preferred stockholders
varies depending on the company. The company, usually controlled by majority
common stockholders, has the option to purchase all or part of the preferred stocks
anytime for any reason. In case of company bankruptcy and eventual liquidation, the
act of selling the company to pay off debt, the preferred stockholders, together with
the creditors and bondholders, are paid off before the common stock owners.
Common stock is the second kind of stocks. Common stock owners usually comprise more
than half of the totality of the company’s stocks. Common stockholders control the
operations of the company for they represent ownership. They are given the right to
cast a number of votes equivalent to the number of their shares in electing the
members of a board which performs oversight function into the operation of the
company, including management decisions. Most common stocks enjoy higher return
of investment over years of market activities which are exposed to high risk
environment.

Page 1 of 8
 General Mathematics 1st Trimester, S.Y. 2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

Bond is an official promissory document issued by a debtor stating the

acknowledgement of
the amount of debt and the pledge to pay back the loaned amount.

Face value is the amount stated in the bond to be used by the bond issuer in calculating the
interest to be paid to the bondholder once a bond matures. This is also referred to as
par value.
Dividend is the amount of interest.
Dividend rate is the interest rate the bond issuer will be used in computing the interest
payment, usually expressed in percent. This is also known as yield. Yield goes up when
bond price goes down, and vice versa.
Maturity date is the date the bond will mature. On this date, the bondholder may redeem the
full amount of the bond or its face value.
Maturity value is the amount which will be paid to the bondholder on the coupon date.
Coupon is a periodic interest payment that the bondholder receives during the time between
purchase date and maturity date; usually received semi-annually.
Coupon dates are interval dates, usually annual or semi-annual, on which the bond issuer will
make interest payments.
Coupon Rate is the rate per coupon payment period; denoted by r.

III. SELLING STOCKS

Another way a shareholder earns an income is to sell his stock. A broker may be used to
buy or sell stocks. The broker’s representative takes charge of the investor’s order. However,
selling a stock will either make a profit, break-even, or take a loss.

Formula
𝑮𝒓𝒐𝒔𝒔 𝑰𝒏𝒄𝒐𝒎𝒆 = 𝑛𝑜 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 × (𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 − 𝑝𝑟𝑖𝑐𝑒 𝑏𝑜𝑢𝑔ℎ𝑡)
𝑪𝒐𝒎𝒎𝒊𝒔𝒊𝒐𝒏 = 0.25% × 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒
𝑽𝑨𝑻 = 12% × 𝐶𝑜𝑚𝑚𝑖𝑠𝑖𝑜𝑛
𝑺𝒂𝒍𝒆𝒔 𝑻𝒂𝒙 = 0.6% × 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒
𝑷𝒓𝒐𝒇𝒊𝒕 = 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
𝑻𝒐𝒕𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 = 𝑆𝑢𝑚 𝑜𝑓 𝑎𝑙𝑙 𝑝𝑟𝑜𝑓𝑖𝑡𝑠

Example Find the total income of Mr. Santos on selling his shares on the following
stocks.

Stock No of Price Selling Gross Expenses Profit

Shares Brought Price Income Commission VAT Sales
Tax
ANI 10 000 7.30 8.20 ₱9,000.00 ₱22.50 ₱2.70 ₱54.00 ₱8,920.80
FGEN 2000 29.35 24.35 −₱10,000.00 ₱25.00 ₱3.00 ₱60.00 −₱10,088.00
FPH 1000 59.95 66.40
SMC 1000 108.00 104.00
URC 1000 131.70 150.30
TOTAL INCOME: ₱19,873.56

Page 2 of 8
 General Mathematics 1st Trimester, S.Y. 2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

Solution
Stock No of Price Selling 𝑮𝒓𝒐𝒔𝒔 𝑰𝒏𝒄𝒐𝒎𝒆 = 10000(8.20 − 7.30) = ₱9,000.00
Shares Brought Price 𝑪𝒐𝒎𝒎𝒊𝒔𝒊𝒐𝒏 = 0.25% × 9000 = ₱22.50
𝑽𝑨𝑻 = 12% × 22.50 = ₱2.70
𝑺𝒂𝒍𝒆𝒔 𝑻𝒂𝒙 = 0.6% × 9000 = ₱54.00
ANI 10 000 7.30 8.20 𝑷𝒓𝒐𝒇𝒊𝒕 = ₱9000 − (₱22.50 + ₱2.70 + ₱54.00 = ₱8920.8

Stock No of Price Selling 𝑮𝒓𝒐𝒔𝒔 𝑰𝒏𝒄𝒐𝒎𝒆 = 2000(24.35 − 29.35) = −₱10,000.00

Shares Brought Price 𝑪𝒐𝒎𝒎𝒊𝒔𝒊𝒐𝒏 = 0.25% × 10,000 = ₱25.00
𝑽𝑨𝑻 = 12% × 25.00 = ₱3.00
𝑺𝒂𝒍𝒆𝒔 𝑻𝒂𝒙 = 0.6% × 10,000 = ₱60.00
FGEN 2000 29.35 24.35 𝑷𝒓𝒐𝒇𝒊𝒕 = −₱10,000 − (₱25.00 + ₱3.00 + ₱60.00) = −₱10,088.00

IV. DIVIDEND
The income of the stockholder receives from his investment is the amount of dividend
he gets. The amount of dividends paid the company depends on the profit the company
makes.

Formula
Total Dividend
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
Total Shares
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 × 𝑃𝑎𝑟 𝑉𝑎𝑙𝑢𝑒 × 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠
𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠
𝑹𝒂𝒕𝒆 𝒐𝒇 𝑰𝒏𝒄𝒐𝒎𝒆 =
𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑡𝑜𝑐𝑘

Example 1 A certain financial institution declared a ₱30,000,000.00 dividend for the common
stocks. If there are a total of 700,000 shares of common stock, how much is the dividend per
share?

Given: Total Dividend = ₱30,000,000.00

Total Shares = 700,000

Find: Dividend per Share

Total Dividend ₱30,000,000.00

Solution: Dividend per Share = Total Shares
= 700,000
= ₱42.86

Therefore, the dividend per share is ₱42.86.

Page 3 of 8
 General Mathematics 1st Trimester, S.Y. 2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

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?

Given: 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 3%

𝑃𝑎𝑟 𝑉𝑎𝑙𝑢𝑒 = ₱500.00
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠 = 200

Find: 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑

Solution: 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 = 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 × 𝑃𝑎𝑟 𝑉𝑎𝑙𝑢𝑒 × 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠

= 0.03 × ₱500.00 × 200
= ₱3,000.00

Thus, the dividend is ₱𝟑, 𝟎𝟎𝟎. 𝟎𝟎.

Example 3
A stock company has a total of 1,200 shares of stocks. Of these shares, 500 are
owned by the Madrigal group of investors and 10 are owned by Atty. Pascual. The company
customized classes of stocks in such a way that the voting power will remain with the original
corporate investors like the Madrigals who availed of the company’s initial public offering. These
select groups are given ten votes per share while the rest of the investors are given one vote per
share.
a. What percent of the total shares of stocks is controlled by the Madrigal group of investors?
b. What percent of the total shares of stocks is controlled by Atty. Pascual?
c. If an election is to be held in the company to elect a new set of members of the board, how
many votes can be cast by the Madrigal group of investors? By Atty. Pascual?

Solution:
500
a. The Madrigal group of investors has controlled 500 of the 1,200 shares. This is ( ) (100) =
1200
𝟒𝟏. 𝟔𝟕% of the total shares.
10
b. Atty. Pascual has controlled 10 of the 1,200 shares. This is (1200) (100) = 𝟎. 𝟖𝟑% of the total
shares.
c. The customized voting power requires 10 votes per share for the original investors. The
Madrigals, one of the original stockholders, can cast (500)(10) = 𝟓, 𝟎𝟎𝟎 votes, while Atty.
Pascual can cast (10)(1) = 𝟏𝟎 votes.

V. STOCKS VS BONDS
VI.

A form of equity financing or raising money A form of debt financing, or raising money by
by allowing investors to be part owners of the borrowing from investors
company
Stock prices vary every day. These prices are Investors are guaranteed interest payments and a
reported in various media (newspaper, TV, return of their money at the maturity date
internet, etc.)
Investors can earn if the stock prices increase, Investors still need to consider the borrower’s credit
Page 4 of 8
 General Mathematics 1st Trimester, S.Y. 2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

but they can lose money if the stock prices rating. Bonds issued by the government pose less risk
decrease or worse, if the company goes than those by companies because the government
bankrupt has guaranteed funding (taxes) from which it can
pay its loans
Higher risk but with possibility of higher returns Lower risk but lower yield
Can be appropriate if the investment is for Can be appropriate for retirees (because of the
the long term (10 years or more). This can guaranteed fixed income) or for those who need
allow investors to wait for stock prices to the money soon (because they cannot afford to
increase if ever they go low take a chance at the stock
market)

VII. BOND INCOME

The interest given by the corporation as a government unit who issued the bond serves as
the income from the bond. The interest of the bond is based on the par value. Because the
par value serves as the principal.

Formula
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = 𝑃𝑎𝑟 𝑉𝑎𝑙𝑢𝑒 × 𝑅𝑎𝑡𝑒 × 𝑇𝑖𝑚𝑒 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠
𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑐𝑜𝑚𝑒
𝑹𝒂𝒕𝒆 𝒐𝒇 𝑰𝒏𝒄𝒐𝒎𝒆 𝒐𝒓 𝒚𝒊𝒆𝒍𝒅 =
𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒇𝒐𝒓 𝒆𝒂𝒄𝒉 𝒃𝒐𝒏𝒅 = 𝑓𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 𝑥 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒

Example 1 Determine the amount of the semi-annual coupon for a bond with a face value
of ₱300,000.00 that pays 10%, payable semi-annually for its coupons.

Given: Face Value (F) = ₱300,000.00

Coupon Rate (r) = 10%

Find: Amount of the semi-annual coupon

Solution: Annual coupon amount = Face Value × Coupon Rate

= ₱300,000.00 × 0.10
= ₱30,000.00
Annual coupon amount
Semi-annual coupon amount =
2
₱30,000.00
= 𝟐
= ₱15,000.00

Thus, the amount of the semi-annual coupon is ₱15,000.00.

Mr. Dominguez purchased one hundred 6%-bonds from ALB Finance

Example 2 Corporation. Each bond has a maturity value of ₱1,000.00 and was purchased at
₱960.00 The bonds mature in 5 years.
a. How much will Mr. Dominguez receive as his dividend for all the bonds if dividends are paid
semi-annually?
b. Compute for its maturity value.
c. After the maturity date, how much is the total earnings of Mr. Dominguez?

Solution:
a. Dividend for each bond = face value x interest rate

Page 5 of 8
 General Mathematics 1st Trimester, S.Y. 2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

Dividend for each bond = ₱1,000.00 x 0.06

Dividend for each bond = ₱60.00

Semi-annual dividend for each bond = half of dividend for each bond for 1 year
Semi-annual dividend for each bond = 0.5 x ₱60.00
Semi-annual dividend for each bond = ₱30.00

Semi-annual dividend for 100 bonds = Semi-annual dividend for each bond x 100
Semi-annual dividend for 100 bonds = ₱30.00 x 100
Semi-annual dividend for 100 bonds = ₱3,000.00

b. Maturity value of the 100 bonds = ₱1,000.00 x 100

Maturity value of the 100 bonds = ₱100,000.00

c. Earnings = maturity value + total dividends – purchase price

Earnings = ₱100,000.00 + ₱3,000.00 – (₱960 x 100)
Earnings = ₱103,000.00 – ₱96,000.00
Earnings = ₱7,000.00

Market Index is the weighted average value of a group of a specific

investment tool. This value is computed by combining several selected
stocks or other investment tools and expressing their aggregate value
against a base value at a specified time. However, this quantity is
designed to represent the entire section of the market and thus track the
market section’s changes over a certain period of time. This value is used
by investors as benchmark in comparing their own company’s
performance. This value also provides them a ready-overview of market
trends.

A stock index is used to reflect the hypothetical portfolio of stock market.

A bond index, on the other hand, is used to compare treasury bills or
corporate bonds.

The theory of efficient market is a belief that in an

ideal efficient market, all participant-investors are aware
of all available relevant market information at any time
and have used the stocked knowledge they have,
including predictions of market trends in trading stocks,
bonds, and other securities. Stocks trade at their fair
value all the time. As such, it would be impossible for any
investor to “beat the overall market performance” either
by expert selection or market timing. Thus, the only way
possible for an investor to earn higher returns is to agree
on investment that entails higher risks.
There are different kinds of risks an investor may encounter. The investor may possibly experience
losses due to:
i. Price risk – risk caused by changes in market prices of equities or bonds.
ii. Credit risk – risk due to a borrower’s failure to pay the principal and/or interest on due
date.
iii. Liquidity risk – risk due to inability to sell or convert assets into cash on time, or in event
where conversion to cash is possible but at a losing end.
iv. Country risk – risk due to political, economic, or social events, or structures in the country.

Page 6 of 8
 General Mathematics 1st Trimester, S.Y. 2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

PERFORMANCE TASK

You invested in stock market and bonds, knowing the effect of the pandemic on the market.
You decided to sell all your shares on stocks and bonds. Calculate your profit.

A. STOCK INVESTMENT (20 points)

Stock No of Price Selling Gross Expenses Profit

Shares Brought Price Income Commission VAT Sales
Tax
BDO 1000 95.50 99.00
PLDT 100 1407.00 1425.00
GMA7 20000 5.12 5.07
DITO 10000 4.30 7.50
SM 100 990.00 1100.00
TOTAL INCOME:

B. BOND INVESTMENT (10 points)

No of Bonds Market Value per Gross Income Brokerage Fee Profit

Held bond (refer to the condition
below)
17 ₱2,220.00
9 ₱1,725.00
85 ₱1,570.00
67 ₱1995.00
25 ₱2,060.00
43 ₱1,740.00
3 ₱1,865.00
100 ₱2000.00
145 ₱750.00
TOTAL INCOME:

𝑩𝒓𝒐𝒌𝒆𝒓𝒂𝒈𝒆 𝑭𝒆𝒆: ₱240.00 𝑓𝑜𝑟 𝑒𝑎𝑐ℎ 𝑏𝑜𝑛𝑑 𝑖𝑓 5 𝑏𝑜𝑛𝑑𝑠 𝑎𝑟𝑒 𝑝𝑢𝑟ℎ𝑎𝑠𝑒𝑑

₱200.00 𝑓𝑜𝑟 𝑒𝑎𝑐ℎ 𝑏𝑜𝑛𝑑 𝑖𝑓 6 𝑡𝑜 49 𝑏𝑜𝑛𝑑𝑠 𝑎𝑟𝑒 𝑝𝑢𝑟ℎ𝑎𝑠𝑒𝑑
₱60.00 𝑓𝑜𝑟 𝑒𝑎𝑐ℎ 𝑏𝑜𝑛𝑑 𝑖𝑓 50 𝑜𝑟 𝑚𝑜𝑟𝑒 𝑏𝑜𝑛𝑑𝑠 𝑎𝑟𝑒 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑑
𝑷𝒓𝒐𝒇𝒊𝒕 = 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝐵𝑟𝑜𝑘𝑒𝑟𝑎𝑔𝑒 𝐹𝑒𝑒

C. DIVIDEND. Solve each problem. Show complete solutions. (20 points)

1. Mr. Roman purchased 1000 shares of stocks at ₱25.00 par value. How much is his dividend if
the percentage declared by the company is 2%?
2. A certain land developer declared a dividend of ₱23,000,000.00 for its common stock.
Suppose there are 500,000 shares of common stock, how much is the dividend per share?
3. Find the amount of the semi-annual coupon for a ₱110,000.00 bond which pays 4.5%
convertible semi-annually for its coupons.
4. The face value of a bond is ₱100,000.00 and currently selling at ₱134,996.00. The bond
matures in 11 years and the coupon payment is semi-annually, if the Maturity rate is 4.03%,
what is the coupon rate?

Page 7 of 8
 General Mathematics 1st Trimester, S.Y. 2020-2021
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11 -
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 10 – Gen Math Subject Teacher:

D. ANALYSIS. Answer the question below comprehensively. (10 points)

1. Why do stock companies prefer equity financing in raising money for their operations than
debt financing?
2. If you were to invest your money, where are you going to invest your money, is it on stocks
or bonds?

References

Albay, E.M.(2016). General mathematics. Makati City, Philippines: DIWA Learning System,
Inc.
Dimasuay, L.A.,Alcala, J., Palacio, J.,(2016). General Mathematics for Senior High School.
Quezon City, Philippines:C&E Publishing, Inc.
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Additional Resource

General Mathematics – Stocks and Bonds (2020). Retrieved from

https://www.youtube.com/watch?v=vjOzWXrBGnw

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