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General Mathematics
Quarter 2 – Module 5:
Stocks and Bonds
General Mathematics – Grade 11
Alternative Delivery Mode
Quarter 2 – Module 5: Stock and Bonds
First Edition, 2020

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Published by the Department of Education, SDO Cabanatuan City

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Assistant Schools Division Superintendent: Enrique E. Angeles, Jr., CESO VI

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Writer: Melody J. Ramos
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 What I Need to Know

This module was designed and written for the learners. After going through this
module, the learner is expected to:

1. illustrate stocks and bonds (M11G M-IIe-1);

2. distinguish between stocks and bonds (M11G M-IIe-2);
3. describe the different markets for stocks and bonds (M11G M-IIe-3); and
4. analyze the different market indices for stocks and bonds (M11G M-IIe-4).

What I Know

Directions: Choose the letter of the correct answer. Write your answer on a
separate sheet of paper.

1. Which of the following is the characteristic of stocks?

A. A form of equity financing or raising money by allowing investors to be
owners of the company
B. A form of debt financing, or raising money by borrowing from investors.
C. Investors are guaranteed with interest payments and return of their
money at the maturity date.
D. It can be appropriate for the retirees (because of the guaranteed fixer
income) or for those who need the money soon.
2. Which of the following is a form of debt financing or raising money by borrowing
from investors and the investors are considered as lenders in the company?
A. stocks B. bonds C. divided D. financing
3. The following terms are related to Bonds EXCEPT?
A. Coupon C. Par Value
B. Price of Bond Rate D. Dividend
4. Which of the following methods is use for measuring the value of a section of
the bond market?
A. Stock Index B. Bond Index C. Stock Yield Ratio D. Bond Yield Ratio
5. What do you call the number of individual buy orders and total number of
shares that a person wishes to buy?
A. Bind Size B. Bid Price C. Ask Price D. Ask Size

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 Lesson

1 Stocks and Bonds

Saving money on a bank is a good thing. However, your money will not grow
much over a period of time, it might but only a little.

Investing your money is one of the ways for you to make money grow. However,
investing is risky because of the nature of markets. Thus, this leaves individuals
confused about where they can best put their money to.

There are tons of ways to invest your money with. In this lesson we are going to
discuss the most commonly heard form of investment which are stocks and bonds.

What’s In

Before we begin, let us first answer the given activity below.

Calculate the gain or loss for each item and record your answer on the table
given below. Write whether the change in price is a gain or loss.

Item Price Bought Price Sold Change in Gain or Loss

Price
1 ₱1 445.20 ₱1 480.40
2 ₱496.00 ₱490.80
3 ₱215.60 ₱240.80
4 ₱1 193.20 ₱1 150.00
5 ₱379.20 ₱600.00

Note that items 1,3, and 5 show gain since there were increased in Price Sold. The
changes in prices in these items were ₱35.20, ₱25.20 and ₱220.80, respectively.
However, items 2 and 4 depict loss as there were decreased in the prices. The original
price of these items were reduced by ₱5.20 and ₱43.20, respectively.
Your knowledge with the previous lesson plays a vital role in this topic which is
stocks and bonds. A stock can be a winner or a loser depending on the outcome. This
is where gain and loss come in. They are the determinants if a particular investment
performs well.

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 What’s New

A. Stocks
Stocks is a share of ownership in a business or company.

Some corporations may raise money for their expansion by issuing stocks.
Owners of stocks may be considered as part owners of the company.

There are two types of stocks: Common stocks and preferred stocks. Both will
receive dividends or share of earning of the company. Dividends are paid first to
preferred shareholders.
Stocks can be bought or sold at its current price called the market value. When
a person buys some shares, the person receives a certificate with the corporation’s
name, owner’s name, number of shares and par value per share.
The stakeholders are the owners of the firm.

Stocks valuation is important in order to compare the price of the stocks with
respect to the market.
If you want to buy stocks of a certain company, you will become one of the many
owners. Being one of the owners, they are entitled to the earnings of the company. They
may get their earnings through dividends or they may opt to sell their stocks at a higher
price the moment the market value has increased.

Definition of terms in relation to stocks.

• Stocks – share in the ownership of a company
• 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)
• 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
market value, it is determined by the company and remains stable over time.

B. Bonds

Bond is a debt of the firm.

A bond is a long-term contract which obligates the borrower with a promise to
pay the principal amount with interest on a specific date to the holder of the bond.
Owning a bond is just like saving money in a bank in which you will earn interest from
the amount borrowed.

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 A bond can be bought from a company or other people. The bond is said to have
a high value if it earns high interest payment compared to the market interest rate.
Otherwise, the bond is valued low.

Bonds are interest bearing security which promises to pay amount of money on
a certain maturity date as stated in the bond certificate. Unlike stockholders,
bondholders are lenders to the institution which may be a government or private
company. Some bond issues are the national government, government agencies,
government owned and controlled corporations, non-bank corporations, banks and
multilateral agencies.

Definition of terms in relation to bonds.

• Bond – interest bearing security which promises to pay
(a.) a stated amount of money on the maturity date, and

(b.) 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
• Coupon Rate – the rate per coupon payment period; denoted by r
• Price of a Bond – the price of the bond at a 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.

• 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 – present value of all cash inflows to the bondholder

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 What is It

To understand more the principles and terms that were discussed, here is the
comparison between stocks and bonds.

STOCKS BONDS
A form of equity financing or raising A form of debt financing, or raising
money by allowing investors to be part money by borrowing from investors
owners of the company.
Stock prices vary every day. These prices Investors are guaranteed with interest
are reported in various media payments and a return of their money at
(newspaper, TV, internet, etc.) the maturity date.
Investing in stock involves some Uncertainty comes from the ability of the
uncertainty. Investors can earn if the bond issuer to pay the bondholders.
stock prices increase, but they can lose Bonds issued by the government pose
money if the stock prices decrease or less risk than those by the companies
worse, if the company goes bankrupt. because the government has guaranteed
funding (taxes) from which it can pay its
loans.
Higher risk but with possibility of higher Lower risk but lower yield.
returns
Can be appropriate if the investment is for Can be appropriate for retirees (because
the long term (10 years or more). This can of the guaranteed fixed income) or for
allow investors to wait for stock prices to those who need the money soon (because
increase if ever they go low. they cannot afford to take a chance at the
stock market).

Market Indices for Stocks and Bonds

In this lesson, you will learn the importance of Market Indices for investors.
These indices show the market pattern and serve as references to decide which stocks
to go for investing.

1. The Stock Market

A Stock Index or Stock Market Index is the measure of the value of a section
of the stock market and is computed from the price of selected stocks. Investors and
financial managers use this to describe the market and compare the return on specific
investment. 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.

Other indices are sector indices, each representing sector (e.g., financial
institutions, industrial corporations, holding firms, service corporations, mining/oil,
and property)

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 The stock index can be a standard by which investors can compare the
performance of their stocks. A financial institution may want to compare its
performance with those of others. This can be done by comparing with the “financial”
index.

2. Stock Market Table

Stock indices are reported in the business section of magazines or newspapers,

as well as online. The following table shows how a list of index values is typically
presented (values are hypothetical).

Index Val Chg %Chg

PSEi 7,523.93 -14.20 -0.19
Financials 4,037.83 6.58 0.16
Holding Firm 6,513.37 2.42 0.037
Industrial 11,741.55 125.08 1.07
Property 2,973.52 -9.85 -0.33
Services 1,622.73 -16.27 -1.00
Mining and Oil 11,914.73 28.91 0.24
In the table above, the terms mean the following:

• Val – value of the index

• Chg – change of the index value from the previous trading day (i.e., value
today minus value yesterday)
• %Chg – ratio of change of the index (Chg) to Val ( i.e., Chg divided by Val)

3. Stock Tables

Newspapers or magazine may also report on stock prices of individual

companies. The table below shows how information about stocks can be presented
(values are hypothetical).

52-WK 52-WK
STOCK HI LO DIV VOL(100s) CLOSE NETCHG
HI LOW
94 44 AAA 60 35.5 .70 2050 57.29 0.10
88 25 BBB 45 32.7 .28 10700 45.70 -0.2

In the table above, the terms mean the following:

• 52 – WK HI/LO – highest/ lowest selling price of the stock in the past 52 weeks
• HI/LO – highest/lowest selling price of the stock in the last trading day
• STOCK – three-letter symbol the company is using for trading
• DIV – dividend per share last year
• VOL (100s) – number of shares (in hundreds) traded in the last trading day (In
this case, stock 100 AAA sold 2,050 shares of 100 which is equal to 20,500
shares)
• CLOSE – closing price on the last trading day

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 • NETCHG – net change between the two last trading days (in the case of AAA, the
net change is 0.10. The closing price the day before the last trading is ₱57.29 -
₱0.10 = ₱57.19.)

4. Buying or Selling Stocks

To buy or sell stocks, one may go to the Philippine Stock Exchange (PSE)
personally. However, nowadays it can be done by making a phone call to a registered
broker or by logging on to a reputable online trading platform. Those with accounts in
online trading platforms may often encounter a table like the following:

Bid Ask/offer
Size Price Price Size
122 354, 100 21.60 21.80 20, 000 1
9 81, 700 21.55 21.90 183, 500 4
42 456, 500 21.50 22.15 5, 100 1
2 12, 500 21.45 22.25 11, 800 4
9 14, 200 21.40 22.30 23, 400 6

In the table above, the terms mean the following:

Bid Size – the number of individual buy orders and the total number of shares that
they wish to buy

Bid Price – the price these buyers are willing to pay for the stock

Ask Price – the price the sellers of the stock are willing to sell the stock
Ask Size – how many individual sell orders have been placed in the online platform
and the total number of shares these sellers wish to sell

For example, the first row under BID means that there a total of 122 traders who
wish to buy a total of 354,100 shares at ₱21.60 per share. On the other hand, the first
row under ASK means that just 1 trader is willing to sell his 20,000 shares at a price of
₱21.80 per share.

5. Bond Market Indices

A bond index or bond market index is a method of measuring the value of a

section of the bond market. The main platform for bonds or fixed income securities in
the Philippines is the Philippine Dealing and Exchange Corporation (or PDEx). Unlike
stock indices which are associated with virtually every stock market in the world, bond
market indices are far less common. In fact, other than certain regional bond indices
which have sub-indices covering the 21 Philippines, our bond market does not typically
compute a bond market index. Instead, the market rates produced from the bond
market are interest rates which may be used as benchmarks for other financial
instruments.

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 A. Examples in Relation to Stocks

Example 1. A certain financial institution declared a ₱30,000,000.00 dividend for

the common stocks. If there is a total of ₱700,000.00 shares of common stock, how
much is the dividend per share?

Given: Total Dividend = ₱30,000,000.00

Total Shares = ₱700,000.00

Find: Dividend per Share

Solution:
𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 ₱30,000,000.00
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 = = = ₱42.86
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒𝑠 ₱700,000.00

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. Ramos owns 200 shares of stock with a par value of ₱500.00. How
much dividend she received?

Given: Dividend Percentage = 3%

Par Value = ₱500.00

Number of Shares = 200

Find: Dividend
Solution:

The dividend per share is ₱500 x 0.03 = ₱15.00.

Since there are 200 shares, the total dividend is:

₱15/share x 200 shares = ₱3,000.00
In summary,

Dividend = (Dividend Percentage) (Par value) (Number of Shares)

= 0.03(₱500.00) (200)

= ₱3,000

Therefore, the dividend is ₱3,000.00

B. Examples in Relation to Bonds

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

Coupon Rate r = 10%

Find: Amount of the Semi-annual Coupon

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 Solution:

Annual Coupon Amount = ₱300,000 (0.10) = ₱30,000

Semi-annual Coupon Amount: ₱30,000 (1/2) = ₱15,000

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

Example 2: Ms. Martinez bought fifty ₱1,500.00 ACTS bonds at 1.03. What is her
total investment in ACTS bonds?

Solution:

Market Price of 1 bond: 1.03 x ₱1,500 = ₱1, 545.00

Total investment: ₱1,545 x 50 = ₱77, 250.00

Thus, the amount total investment is ₱77, 250.00

When bonds are bought and sold through a broker, the broker charges a broker’s
commission or brokerage fee. Hence, the amount investment becomes the market price of
the bonds plus the broker’s commission.

C. Consider the following listing on stocks and answer the questions

that follow:

52-Weeks
HI LO STOCK DIV YLD% VOL(100S) CLOSE NETCHG
120 105 GGG 3.5 2.8 4050 118.50 -0.50
16 12 HHH 0.9 1.1 1070 15.80 0.10

Answers
Questions for Stocks GGG and HHH Stock Stock
GGG HHH
1.What was the lowest price of the stock ₱105.00 ₱12.00
for the last 52 weeks?
2.What was the dividend per share last ₱ 3.50 ₱0.90
year?
3.What was the annual percentage yield 2.8% 1.1 %
last year?
4.What was the closing price in the last ₱118.50 ₱15.80
trading day?
5.What was the closing price the day ₱118.50 +₱ 0.50 ₱15.80- ₱0.10
before the last trading day? =₱ P119.00 = ₱ 15.70

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 What’s More

ACTIVITY 1

Directions: Tell whether the following is a characteristic of stocks or bonds. Write your
answer on a separate sheet of paper.

1. It can be appropriate for retirees (because of the guaranteed fixed income) or for
those who need the money soon.

2. Investors can earn if the security prices increase, but they can lose money if the
security prices decrease or worse, if the company goes bankrupt.

3. It is a form of equity financing, or raising money by allowing investors to be part of

the company.

4. It is a form of debt financing, or raising money by borrowing from investors.

5. Investors are guaranteed interest payments and a return of their money at the
maturity date.

ACTIVITY 2

Directions: Match the term in Column B to its definition in Column A.

Column A Column B
____ 1. the current price of stock at which it can be sold A. Ask Size
____ 2. it is how many individual sell orders have been B. Bid size
placed in the online platform and the total number of shares
these sellers wish to sell C. Bond Index

____ 3. the number of individual buy orders and the total D. Market Value
number of shares they wish to buy E. Stock Market
____ 4. a place where stocks can be bought or sold
____ 5. method of measuring the value of a section of the
bond market

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 What I Have Learned
COMPLETE ME!
A. Directions: Compare stocks and bonds in terms of the following: financing,
interest, investment, risk, and terms.

Stocks Bonds
Financing
Interest
Investment
Risk
Terms

B. Explain the stock tables below.

52- 52- STOCK DIV YLD% VOL(100S) CLOSE NETCHG

WK- WK-
HIGH LOW
75 65 JJJ 2.5 2.8 1500 70 2

52-WK –HIGH -75

52-WK-LOW- 65
STOCK JJJ
DIV 2.5
YLD% 2.8
VOL(100S) 1500
CLOSE 70
NETCHG 2

What I Can Do

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 you
parents, you become interested in buying stocks in a particular company. Below are
the options given to you by your parents:

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 Option 1: Company ABC’s selling stock is ₱1,500.00 per share that 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 that 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?

Assessment

Directions: Choose the letter of the correct answer. Write your answer on a separate
sheet of paper.
1. What is the distinction of bonds from stocks?
A. It is lower risk but lower yield.
B. It is a share of ownership in a business or company.
C. The prices vary every day.
D. It has higher risk but with possibility of higher returns.

2. Which of the following is a form of equity financing or raising money by allowing

investor to be part owners of the company?
A. Stocks B. Bonds C. Share D. Stock Mark

3. Find the yield on ₱5,000.00, 12% ACTS bond priced at 95 plus ₱20 commission.
A. 11.58% B. 12.58% C. 13.58% D. 14.58%

4. What do you call if there is fixed period of time at which the bond is redeemable as
stated in the bond certificate; number of years from time of purchase to maturity date?
A. Term B. Rate C. Stock Yield Ratio D. Bond Yield Ratio

5. What was the closing price the day before the last trading day?

52-WK- 52-WK- STOCK DIV YLD% VOL(100S) CLOSE NETCHG

HIGH LOW
34 23 KKK 1.7 1.75 1200 28 -3
A. 31 B. 25 C. 23 D. 20

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 13
What I Know What's More Assessment
1. A ACTIVITY 1 1. B
2. B 2. A
3. D 1. BONDS 3. B
4. B 2. STOCKS 4. A
5. A 3. STOCKS 5. A
4. BONDS
5. BONDS
ACTIVITY 2.
1. D
2. A
3. B
4. E
5. C
Answer Key
References

Books:

First Edition (2016). General Mathematics Learner’s Material

Department of Education-Bureau of Learning Resources (DepEd-BLR)
Office Address: Ground Floor Bonifacio Building, DepEd Complex
Meralco Avenue, Pasig City, Philippines 1600

Oronce, Orlando A. (2016). General Mathematics. Quezon City: REX

Publishing

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