Stocks and Bonds l1 Qupr

Lesson 1
Stocks and Bonds

Objectives
At the end of this lesson, the learner should be able to
• accurately identify the characteristics of stocks and

bonds;
• accurately differentiate stocks from bonds; and
• correctly solve cost of shares and ownership

percentage.
Essential Questions
• What is the difference between a stock and a bond?
• What are the advantages and disadvantages of owning a

preferred stock? How about owning a common stock?
• How will you determine the ownership of individuals given

their contribution?
Guide Questions
• How do stocks work?
• How do bonds work?
• How can you differentiate stocks and bonds?

Learn about It!
1 Stock
represents ownership of the company
Example:
A company has 1 000 shares of stock outstanding. Tony owns
100 shares, which means that he has a claim to 10% of the
company’s assets and earnings.
Learn about It!
2 Stockholder
a person who has shares in a company
Example:
Since Tony owns 100 shares of the company, then he is called
a stockholder.
Learn about It!
3 Common Stock
a type of stock that represents ownership on a company and is sometimes
accompanied by dividends on a portion of profits
In common stock, investors get one vote for every share to

elect board members who oversee management.
Learn about It!
4 Preferred Stock
a type of stock that represents ownership in a company but does not usually
come with voting rights
In preferred stock, investors are normally guaranteed

dividends as long as the investor holds ownership of shares.
In the event of liquidation, preferred shareholders are paid
off before the common shareholders.
Learn about It!
5 Bond
a debt financing instrument; it is interest-bearing security which promises to pay
an amount of money on certain maturity value as stated in the bond certificate
When companies or other entities such as the government

need to raise money to finance new projects, fund ongoing
operations, or refinance, they issue bonds to investors.
Issued bonds are tied to certain agreements involving interest
rate and maturity date.
Learn about It!
6 Government Bond
bond issued by governments to fund programs, deliver payrolls, and pay bills
There are times where the government issues bonds publicly.

They are sometimes referred to as “notes.”
Learn about It!
7 Corporate Bond
bond issued by businesses to help them pay expenses
Although these pose a higher risk than government bonds,

businesses still can earn a lot more in corporate bonds. These
bonds may be traded over-the-counter or privately between
the borrower and the lender.
Learn about It!
8 Zero-coupon Bond
bond that make no coupon payments but is issued at a considerable discount to
par value
These bonds generate a return once the bondholder is paid

the face value when the bond matures.
Try It!
Example 1:
Determine what is being described by the given statement.
a. It is a financing tool that allows the government to fund

programs, meet payrolls, and pay bills.
b. This gives a shareholder the right to suggest business

ideas and oversee the management.
Try It!
Solution:
a. Government bond
This is a common way of refinancing for the government by

allowing people to invest in the form of notes.
b. Common stock
Common stockholders get to have a say on the direction the

company may or may not take.
Try It!
Example 2: Ernie and four of his siblings

decided to invest different amounts of Member Investment
money to start a company. They invested Ernie ₱300 000
amounts of money as shown. Sibling 1 ₱250 000
a. How much ownership does each
Sibling 2 ₱100 000
individual have?
b. What would be the cost of each share Sibling 3 ₱200 000
if they decide to split the business Sibling 4 ₱50 000
into 10 000 shares?
c. How many shares will each investor
have?
Try It!
Solution:
a. To obtain ownership percentage, divide each contribution by

the total value of the business, which is ₱900 000.
Member Investment Ownership
Ernie ₱300 000 𝟑𝟑. 𝟑𝟑%
Sibling 1 ₱250 000 𝟐𝟕. 𝟕𝟖%
Sibling 2 ₱100 000 𝟏𝟏. 𝟏𝟏%
Sibling 3 ₱200 000 𝟐𝟐. 𝟐𝟐%
Sibling 4 ₱50 000 𝟓. 𝟓𝟔%
Total ₱𝟗𝟎𝟎 𝟎𝟎𝟎 𝟏𝟎𝟎%
Try It!
Solution:
b. The total value of the business is ₱900 000. We divide this

value by 10 000 shares.
900 000 ÷ 10 000 = 90
Thus, the cost of each share would be ₱𝟗𝟎.

Try It!
Solution:
c. To determine how many shares will each investor have,

multiply the percentage of ownership by the total number of
shares.
Member Investment Ownership Shares
Ernie ₱300 000 𝟑𝟑. 𝟑𝟑% 𝟑 𝟑𝟑𝟑
Sibling 1 ₱250 000 𝟐𝟕. 𝟕𝟖% 𝟐 𝟕𝟕𝟖
Sibling 2 ₱100 000 𝟏𝟏. 𝟏𝟏% 𝟏 𝟏𝟏𝟏
Sibling 3 ₱200 000 𝟐𝟐. 𝟐𝟐% 𝟐 𝟐𝟐𝟐
Sibling 4 ₱50 000 𝟓. 𝟓𝟔% 𝟓𝟓𝟔
Total ₱𝟗𝟎𝟎 𝟎𝟎𝟎 𝟏𝟎𝟎% 10 000
Let’s Practice!
Individual Practice:
1. If the total value of a telephone company is ₱5 000 000,

what would be the cost of each share if they decide to split
the business into 25 000 shares?
2. Five friends contributed ₱45 000, ₱20 000, ₱100 000,

₱70 000, and ₱32 000 for a new business venture.
a. How much ownership does each have?
b. What would be the cost of each share if they decide to
split the business into 1 500 shares?
Key Points
1 Stock
represents ownership of the company
2 Stockholder
a person who has shares in a company
3 Common Stock
a type of stock that represents ownership on a company and is sometimes
accompanied by dividends on a portion of profits
Key Points
4 Preferred Stock
a type of stock that represents ownership in a company but does not usually
come with voting rights
5 Bond
a debt financing instrument; it is interest-bearing security which promises to pay
an amount of money on certain maturity value as stated in the bond certificate
6 Government Bond
bond issued by governments to fund programs, deliver payrolls, and pay bills
Key Points
7 Corporate Bond
bond issued by businesses to help them pay expenses
8 Zero-coupon Bond
bond that make no coupon payments but is issued at a considerable discount to
par value
Synthesis
● What is the difference between a stock and a bond?
● As young as you are right now, should you start investing

in stocks and bonds already? Why do you think so?
● How can an investor earn money in stocks and bonds?

Lesson 2
Stock and Bond

Markets
Objectives

● accurately differentiate a stock market from a bond
market;
● correctly solve for the coupon of a bond;
● correctly solve for the fair price of a bond; and
● accurately determine whether a stock is a good

investment or not.
Essential Questions
● What is the difference between the stock market and the

bond market?
● How would you determine if a stock is a good investment?

Learn about It!
Stock Market
1 a marketplace wherein publicly listed companies are issuing and trading shares of
stock through exchange or brokers
The Philippine Stock Exchange (PSE) and New York Stock

Exchange (NYSE) are examples of stock markets.
Learn about It!
2 Dividend
a share in a company’s profit
Cash dividend is money given to shareholders based on the

number of shares they own during the dividend declaration
for the year. This is the most common dividend.
Stock Dividend is made in the form of giving more shares.

Some investors prefer this dividend over cash dividends
because it is tax-free.
Learn about It!
Stock Appreciation
3 the increase in the value of a stock from its first purchased value
When you buy a stock at a lower price and sell it at a higher

price, you use stock appreciation to earn money.
Learn about It!
Bond Market
4 a financial market where issuance and trading of debt securities take place; also
called the debt market
Corporate bonds give debt securities to be able to raise

money for different reasons. Government bonds are issued
by national governments. This is more commonly availed by
conservative investors.
Learn about It!
Coupon
5 interest payment received by the bondholder under a periodic system during the
time between the purchase date and maturity date of the bond
The bondholder gets interest depending on the agreed time

interval. It can be annual, semiannual, quarterly, or monthly.
Learn about It!
Tenor or term of a bond

6 fixed period of time in years after which the bond is redeemable as stated in the
bond certificate
This is the time from the purchase date to the maturity date.
Learn about It!
Fair price of a bond

7 present value of all cash inflows of the bondholder
This is the value of the cash flows the bond is expected to

generate.
Learn about It!
Par Value or Face Value

8 the amount payable on the maturity date of a bond
This is the amount the issuer promises to pay the bondholder

on the maturity date. A bond may be bought at par (fair price
equals face value), discount (fair price is less than face value),
or premium (fair price is greater than face value).
Learn about It!
Required Yield
9 the return a bond must offer for an investment to be worthwhile
This is set by the market and sets a precedent for how

current bond issues will be priced.
Learn about It!
10 Stock Yield Ratio

the ratio of the annual dividend to the current market value per share of the
stock; usually expressed in percent
This is used to interpret the profitability of a stock with

respect to its market value. The market value of a stock is
the current price at which it can be sold.
Try It!
Try It!
Try It!
Try It!
Try It!
Let’s Practice!
Key Points
Stock Market
a marketplace wherein publicly listed
companies are issuing and trading Bond Market
shares of stock through brokers or a financial market where the
exchange issuance and trading of debt
Dividend securities take place
a share in a company’s profit

Coupon
interest payment received by the
bondholder under a periodic system
Stock Appreciation during the time between the
the increase in the value of a purchase date and maturity date of
stock from its first purchased the bond
value
Key Points
Tenor or term of a bond

a fixed period of time in years after
which the bond is redeemable as Required Yield
stated in the bond certificate the return a bond must offer for an
investment to be worthwhile
Fair price of a bond
the present value of all cash
inflows of the bondholder Stock Yield Ratio
the ratio of the annual dividend to
the current market value per share
Par Value or Face Value of the stock; usually expressed in
percent
the amount payable on the
maturity date of a bond
Synthesis
● How does stock yield ratio help in determining where it is

best to invest?
● Do you think the stock market affects our daily lives? In

what way?
● What factors affect stock market prices?

Lesson 3
Stock and Bond Market

Indices
Learning Competency
At the end of the lesson, the learners should be able

to analyze the different market indices for stocks and
bonds (M11GM-IIe-4).
Objectives
At the end of this lesson, the learners should be able to

do the following:
• Accurately determine the value of stock market

transactions.
• Precisely compute the net profit in selling stocks.
• Critically analyze stock market indices based on the

given information.
It has already been shown that putting your money
on quality stock investments can yield higher returns than most
other types of investments. This gives you the best opportunity
to reach your financial objectives and enables you to later
benefit from your money working for you.
Once you invest, it is important for you to learn to analyze the
trends in the stock market. In this way, you will be able to study
and evaluate past and current data that may help you gain an
edge in the markets to make informed decisions in buying and
selling stocks.
In this lesson, you will explore and analyze more the concepts of
stocks and bonds, such as market indices, and hopefully, these
will teach us how to invest our money significantly.
Essential Questions
● Is it possible to directly buy stocks from the stock market?
● Are the common additional charges reasonable in doing

stock market transactions?
Learn about It!
Stockholder
It is a person who has shares in a company.
Example:
Patricia bought shares in Company ABC. Thus, she is a
stockholder.
Learn about It!
Market Index
It is a hypothetical portfolio of investment holdings that
showcases a segment of the financial market.
Example:
Dow Jones Industrial Average, S&P 500, and Nasdaq
Composite are examples of market indices.
Learn about It!
Stockbroker
This is a professional that transacts on behalf of his clients in
executing buy and sell orders for stocks and other securities;
usually associated with a brokerage firm.
Example:
COL Financial, First Metro Sec, BDO Nomura, BPI Trade, and
and Philstocks are examples of stockbrokers.
Learn about It!
Charges and Fees in Buying or Selling Stocks

Buying or selling stocks in the stock market yields some
transaction fees on top of the gross trade amount before a
buy or a sell can be made. The following are the fees and
charges:
Learn about It!

Fees Amount Buy Sell
Broker’s 0.25% of the trade ✓ ✓
Commission amount
12% of the ✓ ✓
Value Added Tax
commission
PSE Transaction 0.005% of the gross ✓ ✓
Fee trade amount
Learn about It!

Fees Amount Buy Sell
Securities Clearing ✓ ✓
Corporation of the
0.01% of the gross
Philippines Fee
trade amount
(Clearing Fee)
No. of shares x Price x ✓
Sales Tax
0.005
Learn about It!

The gross trade amount will be the product of the number of
shares and the current market value of one share.
Learn about It!

Example:
If a stock investor buys 200 shares of a company with a
market value of ₱3.55, the total transaction fee will be
₱712.09.
Learn about It!
Stock Analysis
This involves the evaluation of trading instruments, an
investment sector, or the market. This is used to make buying
and selling decisions.
Learn about It!
Types of Market Analysis

Fundamental analysis is an analysis of various public
information about a stock. Investors look at the financial
statements of the companies of their interest.
Technical analysis is an analysis of patterns of historical stock

prices.
Learn about It!
Types of Stock Charts

Candlestick charts are used by analysts to predict potential
price movement based on past patterns. It reflects the
market's daily open, high, low, and closing prices.
Learn about It!

A bar chart is a collection of price bars showing the open,
high, low, and close prices over a specified period of time.
Learn about It!

A line chart is the most basic type of chart that represents the
price history that connects a series of data points with a
continuous line.
Try it!Practice
Let’s
Example 1: How much will be the total transaction fee for

buying 3 000 shares of a stock with a market value of ₱34.27?
Solution to Let’s Practice

Solution:
1. To determine the gross trade amount, we must multiply the
market value by the number of shares.
Gross Trade Amount = 3 000 × ₱34.27 = ₱102 810


Solution:
2. To know the total transaction fee, we need to determine the
broker’s commission, value added tax, PSE transaction fee,
and clearing fee, then add them to the gross trade amount.

Solution:
a. Broker’s commission
𝐵𝐶 = 0.0025 × ₱102 810 = ₱257.03


Solution:
b. Value Added Tax
𝑉𝐴𝑇 = 0.12 × ₱257.03 = ₱30.84


Solution:
c. PSE Transaction Fee
𝑃𝑆𝐸 𝑇𝐹 = 0.00005 × ₱102 810 = ₱5.14


Solution:
d. Clearing Fee
𝐶𝐹 = 0.0001 × ₱102 810 = ₱10.28


Solution:
3. Add the gross trade amount and the additional charges to
determine the transaction fee.
102 810 + 257.03 + 30.84 + 5.14 + 10.28 = ₱103 113.29


Solution:
Therefore, the total transaction fee is ₱103 113.29.
Try it!Practice
Let’s
Example 2: How much will the net amount be received in

selling 2 500 shares of a stock with a market value of ₱10.24?

Solution:
1. To determine the gross trade amount, we must multiply the
market value by the number of shares.
Gross Trade Amount = 2 500 × ₱10.24 = ₱25 600


Solution:
2. To know the net amount to be received, we need to
determine the broker’s commission, value added tax, PSE
transaction fee, clearing fee, and sales tax, then subtract
them to the gross trade amount.

Solution:
a. Broker’s commission
𝐵𝐶 = 0.0025 × ₱25 600 = ₱64


Solution:
b. Value Added Tax
𝑉𝐴𝑇 = 0.12 × ₱64 = ₱7.68


Solution:
c. PSE Transaction Fee
𝑃𝑆𝐸 𝑇𝐹 = 0.00005 × ₱25 600 = ₱1.28


Solution:
d. Clearing Fee
𝐶𝐹 = 0.0001 × ₱25 600 = ₱2.56


Solution:
e. Sales Tax
𝑆𝑇 = 0.005 × ₱25 600 = ₱128


Solution:
3. Determine the net amount.
To do this, subtract the other charges from the gross trade

amount.

Solution:
3. Determine the net amount.
25 600 − 64 + 7.68 + 1.28 + 2.56 + 128 = ₱25 396.48


Solution:
Therefore, the net amount to be received is ₱25 396.48.
Try It!
1. Anthony wants to buy 500 shares of stock. How much will

be the total transaction fee if the market value of the said
stock is ₱24.35?
2. Cathy bought 200 shares of a random company at ₱12.90.

After a year, she sold the shares at a specific price and
received ₱3 904. How much profit did Cathy gain?
Objectives
● A stockholder is a person who has shares in a company.
● Market index is a hypothetical portfolio of investment

holdings that showcases a segment of the financial
market.
● A stockbroker is a professional that transacts on behalf

of his clients in executing buy and sell orders for stocks
and other securities usually associated with a brokerage
firm.
Objectives
● Buying or selling stocks in the stock market yields some

transaction fees on top of the gross trade amount before a
buy or a sell can be made.
● Stock analysis involves evaluating trading instruments, an

investment sector, or the market. Investors use this to
make buying and selling decisions.
Objectives
● The following are the different types of stock market

analysis.
o Fundamental Analysis is an analysis of various public
information about a stock. Investors look at the
financial statements of the companies of their interest.
o Technical Analysis is an analysis of patterns of
historical stock prices.
Objectives
● The following are the different types of stock charts.

o Candlestick charts are used by analysts to predict
potential price movement based on past patterns. It
reflects the market's daily open, high, low, and closing
prices.
o Bar charts are a collection of price bars showing the
open, high, low, and close prices over a specified period
of time.
Objectives
● The following are the different types of stock charts.

o Line charts are the most basic type of chart that
represents the price history that connects a series of
data points with a continuous line.
Lesson 4
Theory of Efficient
Markets
Objectives
● correctly state the theory of efficient market;
● properly differentiate the difference between

fundamental analysis and technical analysis; and
● correctly determine which analysis best suits the

given information.
Essential Questions
● What does the theory of efficient market state?
● What is the difference between fundamental and technical

analyses?
● What are the three forms of efficient markets?

Guide Questions
● What factors affect the stock prices?
● How do these factors affect stock prices?
● Are there any other factors not mentioned in the video

that you think affect stock prices?
Learn about It!
Fundamental Analysis
1 This is an approach whereby the intrinsic value of a stock is calculated by looking
at the basic economic factors, the fundamentals. This analysis also checks the
various public information about a stock. This is best employed for long-term
investing.
Example:
If an investor analyses the public records of revenue of a

company, then he is doing a fundamental analysis.
Learn about It!
Technical Analysis
2 This is an investment methodology that considers the investments purely
surrounding the market. This does not consider the actual operations or value of
the company itself. This analysis also checks patterns of historical stock prices.
This is best used for short-term investing.
Example:
If an investor seeks the relative strength index, moving

averages, regressions and stock market then he is doing a
technical analysis.
Learn about It!
3 Efficient Market Theory

This is a theory that says that all known information about stocks and other
securities are already factored in the prices of those stocks and securities. This
assumes that no amount of analysis may give any investor an edge over the other
investors – which is basically the market. This theory suggests that stock prices are
accurate and/or precise.
Example:
Weak form
According to this form of an efficient market, stock prices already
reflect all past market trading data and historical information only.
Thus, knowing past data will not give investors an edge. If this form is
true, then performing a technical analysis will not give new
information. It follows that investors are not given a systemic profit.
Learn about It!

a theory that says that all known information about stocks and other securities are
already factored in the prices of those stocks and securities. This assumes that no
amount of analysis may give any investor an edge over the other investors – which
is basically the market. This theory suggests that stock prices are accurate and/or
precise.
Example:
Semi-strong form
According to this form of an efficient market, stock prices already
reflect all publicly available data including any product, management
team, financial statement, competitors and industry. If this is true, then
performing fundamental analysis will not give new information and
that the investor will gain no significant profit.
Learn about It!

a theory that says that all known information about stocks and other securities are
already factored in the prices of those stocks and securities. This assumes that no
amount of analysis may give any investor an edge over the other investors – which
is basically the market. This theory suggests that stock prices are accurate and/or
precise.
Example:
Strong form
According to this form of efficient market, stock prices already reflect
all publicly available data and all its past market trading data and
historical information including all inside information. Performing both
fundamental and technical analysis will not benefit the investors.
Try It!
Example 1:
Liam is eager to invest in a company using its past price
movements. Determine which technique should he use.
Try It!
Example 1:
Liam is eager to invest in a company using its past price
movements. Determine which technique should he use.
Solution:
Technical analysis is better to employ here given that he is

accounting for past price movements.
Try It!
Example 2:
Based on the difference between Fundamental Analysis and
Technical Analysis, determine which will be more applicable
given the following scenario:
Paris bombing causes some price hike in the European

country.
Try It!
Example 2:
Based on the difference between Fundamental Analysis and
Technical Analysis, determine which will be more applicable
given the following scenario:
Paris bombing causes some price hike in the European

country.
Solution:
Fundamental Analysis is best to use since we might look at
some economic implications of the bombing.
Let’s Practice!
1. What is the theory that states that stock prices already

reflect all the available information about the stock and all
past market trading data?
2. Before Zylo invests in a company, she analyzes the

company’s economic factors such as the future growth of
the company. Determine what technique she is using.
Key Points
Fundamental Analysis
1 This is an approach whereby the intrinsic value of a stock is calculated by looking
at the basic economic factors, the fundamentals. This analysis also checks the
various public information about a stock. This is best employed for long-term
investing.
Technical Analysis
2 This is an investment methodology that considers the investments purely
surrounding the market. This does not consider the actual operations or value of
the company itself. This analysis also checks patterns of historical stock prices.
This is best used for short-term investing.
.
Key Points
Efficient Market Theory

3 This is a theory that says that all known information about stocks and other
securities are already factored in the prices of those stocks and securities. This
assumes that no amount of analysis may give any investor an edge over the other
investors – which is basically the market. This theory suggests that stock prices
are accurate and/or precise.
Synthesis
● Which theories of efficient market negate the purpose of a

fundamental analysis? Of a technical analysis?
● Is the efficient market hypothesis or theory true? Why or

why not?
● Why do you think people avail bank loans?

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Lesson 1

Stocks and Bonds

At the end of this lesson, the learner should be able to

• accurately identify the characteristics of stocks and

• accurately differentiate stocks from bonds; and

• correctly solve cost of shares and ownership

• What is the difference between a stock and a bond?

• What are the advantages and disadvantages of owning a

• How will you determine the ownership of individuals given

• How do stocks work?

• How do bonds work?

• How can you differentiate stocks and bonds?

In common stock, investors get one vote for every share to

In preferred stock, investors are normally guaranteed

When companies or other entities such as the government

There are times where the government issues bonds publicly.

Although these pose a higher risk than government bonds,

These bonds generate a return once the bondholder is paid

Determine what is being described by the given statement.

a. It is a financing tool that allows the government to fund

b. This gives a shareholder the right to suggest business

This is a common way of refinancing for the government by

Common stockholders get to have a say on the direction the

Example 2: Ernie and four of his siblings

a. To obtain ownership percentage, divide each contribution by

b. The total value of the business is ₱900 000. We divide this

900 000 ÷ 10 000 = 90

Thus, the cost of each share would be ₱𝟗𝟎.

c. To determine how many shares will each investor have,

1. If the total value of a telephone company is ₱5 000 000,

2. Five friends contributed ₱45 000, ₱20 000, ₱100 000,

● What is the difference between a stock and a bond?

● As young as you are right now, should you start investing

● How can an investor earn money in stocks and bonds?

Stock and Bond

At the end of this lesson, the learner should be able to

● correctly solve for the coupon of a bond;

● correctly solve for the fair price of a bond; and

● accurately determine whether a stock is a good

● What is the difference between the stock market and the

● How would you determine if a stock is a good investment?

The Philippine Stock Exchange (PSE) and New York Stock

Cash dividend is money given to shareholders based on the

Stock Dividend is made in the form of giving more shares.

When you buy a stock at a lower price and sell it at a higher

Corporate bonds give debt securities to be able to raise

The bondholder gets interest depending on the agreed time

Tenor or term of a bond

Fair price of a bond

This is the value of the cash flows the bond is expected to

Par Value or Face Value

This is the amount the issuer promises to pay the bondholder

This is set by the market and sets a precedent for how

10 Stock Yield Ratio

This is used to interpret the profitability of a stock with

a share in a company’s profit

Tenor or term of a bond

● How does stock yield ratio help in determining where it is