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    GenMath Week 5

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    Daphne Manalastas
    The document provides examples and exercises to illustrate the key differences between stocks and bonds. Stocks represent partial ownership in a company and offer returns through price appreciation if sold at a higher value, while bonds are loans that provide regular interest payments but carry less risk. The stock market involves higher risk due to fluctuating prices but can provide larger returns, while the bond market has more stable and predictable returns through interest payments.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    GenMath Week 5

    Uploaded by

    Daphne Manalastas
    52 views7 pages
    The document provides examples and exercises to illustrate the key differences between stocks and bonds. Stocks represent partial ownership in a company and offer returns through price appreciation if sold at a higher value, while bonds are loans that provide regular interest payments but carry less risk. The stock market involves higher risk due to fluctuating prices but can provide larger returns, while the bond market has more stable and predictable returns through interest payments.

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    The document provides examples and exercises to illustrate the key differences between stocks and bonds. Stocks represent partial ownership in a company and offer returns through price appreciation if sold at a higher value, while bonds are loans that provide regular interest payments but carry less risk. The stock market involves higher risk due to fluctuating prices but can provide larger returns, while the bond market has more stable and predictable returns through interest payments.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    52 views7 pages

    GenMath Week 5

    Uploaded by

    Daphne Manalastas
    The document provides examples and exercises to illustrate the key differences between stocks and bonds. Stocks represent partial ownership in a company and offer returns through price appreciation if sold at a higher value, while bonds are loans that provide regular interest payments but carry less risk. The stock market involves higher risk due to fluctuating prices but can provide larger returns, while the bond market has more stable and predictable returns through interest payments.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 7

    Ruby Ann Grace P.

    Salting
    STEM 11-Justice

    General
    Mathematics 11

    Exercise 1: Alec inherited P1,000,000 from his grandparents. He


    planned to invest it for his future. He was offered a 45% ownership and the
    other one is 6.5% bond of the food chain that will be built on their local
    area. Help Alec decide by illustrating to him the two options with the
    different successful rate.

    Answer: 1,000,000 x 45% = 450,000 Ownership


    1,000,000 x 6.5% = 65,000 Food Chain

    Exercise 2: The problems below illustrate stocks or bonds. Using the


    important terms related to stocks and bonds, answer the following problems
    completely.
    a. A land developer declared a dividend of P5,000,000 for its common
    stock. Suppose there are 100,000 shares, how much is the dividend per
    share?

    Answer: 5,000,000 Divided by 100,000 = P50

    b. Find the amount of semi-annual coupon for a P300,000 bonds


    which pays 6.5% convertible semi-annually for its coupons.
    Ruby Ann Grace P. Salting
    STEM 11-Justice

    Answer: Semi-annual bond = P300,000


    Rate: 6.5%
    -Taking out 6.5% of P300,000
    = P (6.5 x 300,000)
    100
    = P19,500
    Now we divide it by 2 as we get it semi-annually
    P19,500 = P9,750
    2
    Final Answer: P9,750, and a semi-annual bond
    yield pf 3.25%

    c. A certain company gave out P50 dividend per share for its common
    stock. The market value of the stock is P125. Determine the stock
    yield ratio.

    Answer: Share Price: P50


    Dividend: P125
    Yield = Dividend/price
    = 50÷125
    = 0.4
    Final Answer: Hence, 0.4
    Ruby Ann Grace P. Salting
    STEM 11-Justice
    d. What is the current yield of a bond whose face value is P15,000
    and pays an annual interest of 6.5% if purchased at face value at
    P13,500?
    𝟏𝟑, 𝟓𝟎𝟎 × (𝟏 + 𝟎. 𝟎𝟔𝟓) − 𝟏𝟓, 𝟎𝟎𝟎 = −𝟒. 𝟏𝟓%
    𝟏𝟓, 𝟎𝟎𝟎

    Final Answer: -4.15%

    Exercise 1: Tell me whether the following statement describe the


    characteristics of stocks or bonds.
    e. Issues of strake of ownership in a company.

    Answer: (Stock)

    f. Investment that generally have a higher reward.


    Answer: (Bond)

    g. Debt that is made with and inventors for a cash exchange for interest.

    Answer: (Bond)

    h. Inventers can earn money if the security increases, but they can lose money if
    the security decreases.
    Answer: (Stock)

    I. The seller agrees to pay interest on the loan at a fixed rate and schedule.
    Answer: (Stock)
    Ruby Ann Grace P. Salting

    STEM 11-Justice

    Exercise 2: In your own word and understanding briefly differentiate


    stocks from bonds. You can give your own example to elaborate your
    understanding of the content.

    Answer: Stocks give you partial ownership in corporation, while


    bonds are a loan from you to a company or government. The
    biggest difference between them is how they generate profit:
    stocks must appreciate in value and be sold later on the stock
    market while most bonds pay fixed interest overtime.

    Activity 1: Key Differences. From the reading above summarize the


    key differences of the markets by completing the table below.

    Markets Place Risk Performance


    (Index)
    Stock Market Nyse Idiosyncratic Risk Standard &
    Poor's (S&P)
    Bond Market Nasdaq Diversification Exchange-Traded
    Fund (ETF)

    a. Which of the markets is centralized? How about the others?

    Answer: A centralized market is a financial arrangement in which


    all orders are routed through a single central exchange and
    there is no other competitive market. The listed prices for the
    various assets listed on the exchange are the only price
    shareholders looking to purchase or sell the asset.
    Ruby Ann Grace P. Salting

    STEM 11-Justice

    b. Which of the two has higher risks?


    Answer: Stock Market

    c. What are the indicates that can gauge the stock market performance?

    Answer: The most common measures of performance are the


    market indexes, with the Dow Jones Industrial Average and the
    S&P 500 being the most popular.

    Activity 2: Markets’ Features. Based on your reading, summarize the


    key features of the markets with the guide questions below.

    Features Equity market Fixed-income market

    Types of Securities Traded Debt, equity, derivative, the buying and selling of
    and hybrid securities. securities including
    government and corporate
    bonds.
    Accessibility of the Market Generally, very accessible. is more commonly referred
    to as the debt securities
    market or the bond market.
    Levels of Risk The risk involved in the Risks can impact the
    changing prices of stock market value and cash
    investments. flows from the security. The
    major risks include interest
    rate, reinvestment,
    call/prepayment, credit,
    inflation, liquidity,
    Ruby Ann Grace P. Salting

    STEM 11-Justice
    exchange rate, volatility,
    political, event, and sector
    risks.
    Expected Returns The expected return is the The gains from income and
    profit or loss that an appreciation over a
    investor anticipates on an specified period. In the
    investment that has known context of bond market
    historical Rates of Return instruments, this includes
    (RoR). coupon interest, interest
    on interest and price
    appreciation.
    Goals of Inventors Safety, income, and capital to minimize risk and
    gains are the big. three maximize return. It is in
    objectives of investing contrast with a speculator
    who is willing to invest in a
    risky asset with the hopes
    of getting a higher profit.
    Strategies Used by Market Avoid the herd mentality. Investing in bonds, bond
    Participants mutual funds, and
    certificates of deposit
    (CDs). One such strategy
    using fixed income
    products is called the
    laddering strategy. A
    laddering strategy offers
    steady interest income
    through the investment in
    a series of short-term
    bonds.
    Example Markets New York Stock Exchange, More commonly referred to
    Nasdaq, Tokyo Stock as the debt securities
    Exchange, Shanghai Stock market or the bond market.
    Exchange, and Euronext It consists of bond
    Europe. securities issued by the
    federal government,
    corporate bonds, municipal
    bonds, and mortgage debt
    instruments

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