Basic Concepts of Stocks and Bonds || Grade 11 General Mathematics

Summary

This educational video for grade 11 mathematics covers the basics of stocks and bonds. It defines key terms, differentiates between common and preferred stocks, and explains bonds as debt instruments. The tutorial discusses stock valuation, market dynamics, and the concepts of equity and debt financing. It also explores the risks and returns associated with stocks versus bonds, and provides examples to calculate dividends, stock yield ratios, and bond-related values. The video concludes with insights into long-term investments and market indices for stocks and bonds.

Takeaways

• 📚 The class is focused on basic concepts of stocks and bonds for Grade 11 general mathematics.
• 🏢 Stocks represent a share of ownership in a company, making stockholders part-owners of the business.
• 💼 There are two types of stocks: common stocks, which entitle holders to dividends, and preferred stocks, which receive dividends before common stockholders.
• 📈 Stock valuation is crucial for comparing stock prices in the market, with stock prices fluctuating daily.
• 💵 Bonds are a form of debt financing where a company borrows money from investors, promising to pay a fixed interest rate and return the principal on a maturity date.
• 💻 The difference between stocks and bonds lies in the fact that stocks are equity financing with higher risk and potential for high returns, while bonds are debt financing with lower risk and yield.
• 📊 The stock yield ratio is a measure of dividends received relative to the amount invested, calculated as the annual dividend per share divided by the market value per share.
• 💹 Dividends are profits shared with shareholders, with dividend per share being the total dividend divided by the number of shares.
• 💼 The par value of a stock is the stated value on the company's certificate and remains stable over time, unlike market value which fluctuates.
• 📉 Bonds have terms like coupon rate, which is the interest rate paid periodically, and par value, which is the amount payable on maturity.
• 🌐 Market indices for stocks and bonds measure the value of a section of the market and are used to describe and compare market performance.

Q & A

What is the primary difference between stocks and bonds?

Stocks represent a share of ownership in a company, making the stockholder part owner of the firm, while bonds are a form of debt financing where the bondholder is essentially lending money to the company.

What are common stocks and how do they differ from preferred stocks?

Common stocks give stockholders the right to receive dividends. Preferred stocks also provide dividends, but they are paid out before common stock dividends in the event of liquidation.

How are dividends calculated for a company's common stock?

Dividends per share are calculated by dividing the total declared dividend by the total number of shares outstanding.

What is the stock yield ratio and how is it calculated?

The stock yield ratio is the ratio of the annual dividend per share to the market value per share, also known as the current stock yield.

What is the par value of a bond and how does it differ from the market price?

The par value of a bond is the face value stated on the bond certificate, which remains stable over time. The market price is the current price at which the bond can be bought or sold, which can fluctuate.

How is the semi-annual coupon amount for a bond determined?

The semi-annual coupon amount is determined by multiplying the bond's par value by the coupon rate and then by one-half, since it's paid semi-annually.

What is the difference between buying a bond at par, at a discount, or at a premium?

A bond is bought at par when the purchase price equals the par value. It's bought at a discount if the purchase price is less than the par value, and at a premium if the purchase price is greater than the par value.

How can you determine the annual income from bonds?

The annual income from bonds is calculated by multiplying the par value of the bonds by the number of bonds and the interest rate.

What is the yield of a bond and how is it calculated?

The yield of a bond is the annual income from the bond divided by the amount invested in the bond. It is expressed as a percentage.

What is a stock index and how is it used by investors?

A stock index is a measure of the value of a section of the stock market, computed from the prices of selected stocks. Investors and financial managers use it to describe the market and compare the returns on specific investments.

What information can be found in stock tables and how are they useful to investors?

Stock tables provide information such as the 52-week high/low prices, the highest and lowest selling prices of the stock in the last trading day, stock symbols, volume, closing prices, and net changes. This information is useful for investors to make informed trading decisions.

Outlines

00:00

📈 Introduction to Stocks and Bonds

This paragraph introduces the topic of stocks and bonds in the context of Grade 11 General Mathematics. It defines stocks as a share of ownership in a company, making stockholders part owners. It explains stock valuation and the two types of stocks: common and preferred. Common stockholders receive dividends, while preferred stockholders get paid dividends first. The paragraph also covers bonds, which are debt certificates showing a company has borrowed money for a fixed period at a set interest rate. Bonds are interest-bearing securities with a maturity date. The key difference highlighted is that stocks represent equity financing while bonds represent debt financing. Stocks have variable prices reported daily, whereas bonds offer guaranteed interest payments and principal return on maturity. The risk and return relationship is also discussed, with stocks being riskier but potentially offering higher returns, and bonds being lower risk with lower yields.

05:01

📊 Stock and Bond Terminology

The second paragraph delves into the specific terms related to stocks and bonds. For stocks, it defines dividends, dividend per share, stock market, market value, and stock yield ratio. It explains that dividends are a share of a company's profit, and the stock market is where stocks are bought and sold. The market value is the current price at which a stock can be sold, and the stock yield ratio is the ratio of annual dividends per share to the market value per share. The paragraph then moves on to bond-related terms, defining the face value, coupon rate, and par value. It also discusses the conditions under which bonds can be purchased: at par, at a discount, or at a premium. The term or tenor of a bond is also explained, which is the fixed period until the bond is redeemable. The paragraph concludes with a word problem involving the calculation of dividend per share for a company.

10:02

💼 Stock and Bond Calculation Examples

This paragraph provides examples of calculations related to stocks and bonds. It begins with a problem calculating the dividend per share for a company that declared a total dividend and has a given number of shares outstanding. The example shows how to find the dividend per share by dividing the total dividend by the total number of shares. Another example calculates the dividend received by an individual shareholder based on the dividend percentage, the number of shares owned, and the par value of the stock. The paragraph also explains how to use the stock yield ratio to measure the dividends received in relation to the amount invested. Two corporations are compared using their stock yield ratios to illustrate which investment might be more profitable. The examples demonstrate the application of financial ratios and calculations in evaluating stocks and bonds.

15:03

📉 Bond Market and Stock Indices

The fourth paragraph discusses the bond market and stock indices. It explains that a stock index measures the value of a section of the stock market based on selected stocks' prices. Investors and financial managers use these indices to describe the market and compare investment returns. The paragraph provides an example of a stock index table showing the index, its value, change, and percent change. It also touches on stock tables, which include the 52-week high and low prices, the highest and lowest selling prices of stocks in the last trading day, and other details such as stock symbols, trading volume, and closing prices. The paragraph concludes with a brief mention of the bid and ask prices in the context of buying or selling stocks.

20:06

🌐 Overview of the Bond Market

The final paragraph provides an overview of the bond market, emphasizing the role of the Philippine Dealing and Exchange Corporation (PDEX) as the main platform for bonds or fixed-income securities in the Philippines. It summarizes the basic concepts of stocks and bonds discussed in the video and encourages viewers to subscribe to the channel for updates on new videos. The paragraph serves as a conclusion to the tutorial, reminding viewers of the importance of understanding the fundamentals of investing in stocks and bonds.

Keywords

💡Stocks

Stocks represent a share of ownership in a company, allowing the holder to partake in the company's profits and growth. In the video, stocks are discussed as a form of equity financing, where investors can become part-owners of a company. An example given is the distinction between common and preferred stocks, where common stockholders receive dividends, and preferred stockholders get paid dividends first.

💡Bonds

Bonds are debt securities issued by companies or governments to raise capital by borrowing from investors. They promise to pay a fixed rate of interest over a certain period and repay the principal amount on maturity. In the video, bonds are contrasted with stocks, representing a form of debt financing where investors lend money with a guaranteed return.

💡Dividends

Dividends are the profits distributed by a corporation to its shareholders. They are a portion of the company's earnings paid out to stockholders. The video explains how dividends are calculated, such as the example where Guzman Corporation declared a dividend and the dividend per share was calculated by dividing the total dividend by the number of shares.

💡Stock Valuation

Stock valuation is the process of determining the worth of a company's stock. It helps investors compare the market price of a stock with its intrinsic value. The video mentions that stock valuation is important for comparing the price of stocks with respect to the market.

💡Market Value

Market value refers to the current price at which a stock can be bought or sold. It is determined by supply and demand in the market. The video uses market value to calculate the stock yield ratio, which is the ratio of the annual dividend per share to the market value per share.

💡Stock Yield Ratio

The stock yield ratio is a financial metric that measures the annual dividend per share relative to the market value per share. It's used to evaluate the income generated by a stock investment. In the video, the stock yield ratio is calculated for Corporation A and Corporation B to compare the dividends shareholders are getting relative to their investment.

💡Coupon Rate

The coupon rate is the annual interest rate paid by a bond's issuer to its investors. It's usually expressed as a percentage of the bond's face value. The video provides an example of calculating the semi-annual coupon payment for a bond with a given face value and coupon rate.

💡Par Value

Par value, also known as face value, is the stated value of a bond or stock, which doesn't necessarily reflect its market price. The video discusses how par value is used to calculate dividends and is the amount payable on the bond's maturity date.

💡Stock Market

The stock market is a platform where stocks are bought and sold. It's where investors trade shares of publicly traded companies. The video mentions the stock market in the context of where stocks can be bought or sold and how market value is determined.

💡Risk and Return

Risk and return are fundamental concepts in investing. Stocks are generally considered higher risk with the potential for higher returns, while bonds are lower risk with lower returns. The video contrasts these concepts, explaining that stocks involve uncertainty about future profits, whereas bonds guarantee interest payments and return of principal.

💡Bond Market

The bond market is where bonds are issued and traded. It's part of the fixed income securities market. The video touches on the bond market by discussing the role of the Philippine Dealing & Exchange Corp. (PDEx) as the main platform for bonds in the Philippines.

Highlights

Introduction to the basic concepts of stocks and bonds for Grade 11 general mathematics.

Definition of stocks as a share of ownership in a business or company.

Explanation of stock valuation and its importance in comparing stock prices to the market.

Differentiation between common stocks and preferred stocks.

Definition of bonds as a debt certificate with a fixed interest rate and maturity date.

Comparison of stocks and bonds in terms of equity financing and debt financing.

Explanation of the variability of stock prices and the guaranteed interest payments for bonds.

Risk and return analysis for stocks and bonds.

Recommendations for long-term and short-term investments in stocks and bonds.

Definition of terms related to stocks, such as dividends, dividend per share, and stock market.

Explanation of the stock yield ratio and its calculation.

Definition of terms related to bonds, including coupon, par value, and bond price.

Example problem calculating dividend per share for common stocks.

Example problem calculating the dividend received from a stock with a given par value and dividend percentage.

Example problem comparing stock yield ratios of two corporations to measure dividend returns.

Example problem calculating the semi-annual coupon for a bond.

Example problem determining the total investment in bonds at a premium price.

Example problem calculating the annual income from bonds.

Example problem finding the yield of a bond with a given price and commission.

Discussion on market indices for stocks and bonds and their significance.

Explanation of stock tables, including 52-week high/low, bid/ask prices, and volume.

Overview of the bond market and the Philippine Dealing and Exchange Corporation (PDEX).

Conclusion and call to action for viewers to subscribe for more educational content.

Transcripts

hello and good day welcome back to our

class

this is teacher on indigenous month our

topic for today is the basic concepts of

stocks and banks

this is for grade 11 general mathematics

at the end of this tutorial video you've

been able to illustrate stocks and bonds

and distinguish between stocks and bonds

specifically we have the definition of

terms related to stocks

definition of terms related to bonds and

finally give examples on stocks and

[Music]

bonds

let us define first the stocks stocks

are actually the share

of ownership in a business or company so

other sub stocks may be considered as a

part owners of the company

also the stockholders are owners of the

firm

stock valuation is important in order to

compare the price of the stocks with

respect to the market

generally there are two types of stocks

the first one is the common stocks

meaning to say

that okay stockholders receive dividends

while the prepared stocks are actually

stockholders receive also dividends but

they are the one to pay first with the

dividends

if we talk about bonds bonds the debt of

the pure

so bond is a certificate which proves

that a company

or corporation borrowed money from a

certain group of individuals or

investors for a definite period of time

at the fixed rate

also bonds are interest bearing security

which promises to pay

amount of money on a certain maturity

date it means that a company shows

iou

so to differentiate more on stocks and

months so

stocks is actually a form of equity

financing

or by allowing investors to be part

owner of

the company while bonds a form of debt

financing

or raising money by borrowing from

investors

also stocks prices vary every day

these prices are reported in various

media

while bonds investors are guaranteed

interest payment

and a return of their money on the

maturity date

while on stocks investing in stocks

involves

some uncertainty while bonds

uncertainty comes from the ability of

the bond issuer

to pay the bond holders

another difference of stocks and bonds

so higher risk

but possibility of high returns while

bonds lower risk but

lower yield again on the stocks they are

following the higher the risk

the higher the returns and the other way

around

the lower that is the lower the return

next

honestly long-term investment is

suitable for 10 years or more

while balance this is good for shortened

investment

such as less than a year so this is also

good for

pensioners because our pensioners need

okay secured money

again let's move on to definition of

terms in relation to

stocks so dividends are shares or share

in the company's profit

while dividend per share is the region

of the dividend

to the number of shares while stock

market is a place where stocks can be

bought or sold

and finally market value is the current

price of the stock at which

it can be sold

another useful turn that we will talk

about is the stock yield ratio

this is the ratio of the annual dividend

per share

and the market value per share this is

also known as the current stock yield

so next one is the part value so this

is the pair share amount as stated on

the company's certificate

unlike the market value it is determined

by the company

and remains stable over time

these are the terms related to bonds so

if you say bonds so this is the interest

bearing security which

promises to pay on two conditions we

have the stated amount of money on the

maturity date

and the regular interest payment

while we are talking about coupon so

coupon is the periodic interest payment

that the bondholder receives during the

time

between the purchase date and maturity

date usually receives semi

annually so document rate is the rate

procurement payment period

since this is denoted by r well the

price of a bond

okay the price of about a purchase time

is denoted by

p so the par value or paste value

so that is the amount payable on the

maturity date

denoted by f so there are three

conditions

if p is equal to f so meaning to say the

bar is purchased

at par okay well if p is less than

f so the bond is purchased at the

discount

while if p is greater than f so the bond

is purchased at premium

we need to consider also the term or

tenor of a bun whenever we say this one

so this is the fixed period of time in

years

at which bond is redeemable as stated in

the band certificate

number appears from time of purchase to

maturity date

and finally we have the pair price of a

bond meaning to say

this is the present value of all cash

inflows

to the ban holder let's try this word

problem

related to stocks and ban so example

number one

the guzman corporation declared a 30

million

dividend for the common stocks if

there's a total of 600

000 shares of common stock how much is

the dividend per share

so we want to find out the given so the

given are the following so we have the

total dividend is

30 million well the total shares is 600

000 and we want to find out the dividend

per share

now in order to find the dividend per

share

so this is actually the total dividend

divided by the total shares

so we will substitute the value

of 30 million divided by 600 thousand

so therefore we can say that the

dividend per share

is 50 pesos let's have

example number two a certain corporation

declared a three percent dividend on

stock with a far

value of 500 pesos missile owns

200 shares of stock with a par value of

500 pesos

how much is the dividend she received so

let's identify first a given

so the dividend percentage is three

percent the number of shares is 200

where while the part value is 500 pesos

and we want to find out the dividend

so again so the dividend is equal to the

dividend percentage

times part value times the number of

share

so we have okay so 3 percent can be

rewritten

as 0.03 times 500

times 200 so this is equal to 3

thousand pesos so therefore the dividend

is three thousand

pesos so let's move on to problem number

three

corporation a with the current value of

56

pesos gave a dividend of seven pesos per

share for its common stock

corporation b with a current market

value of 100 pesos

gave a dividend of 20 pesos per share

use stock yield ratio to measure how

much dividends

shareholders are getting in relation to

the amount

invested so let's have corporation a so

the given

or dividend pressure is 7 pesos

well the market value is 56 pesos and we

want to find out the stock yield ratio

so again so stocking ratio that is equal

to dividend per share

all over market value so stock yield is

7 over 56

or that is equal to 0.125

so therefore we can say that the stock

yield ratio is 0.125

or 12.5

so let's move on to corporation b so the

given or

dividend pressure is 20 pesos market

value is 100

and we want to find out the stock yield

ratio again

so the stock yield ratio is equal to

dividend per share

all over market value so we have the

stock

yield ratio that is equal to 20 over 100

or 0.2 so therefore the stock yield

ratio is 0.2

or 20 so for us to have a clear

idea for the corporation a incorporation

b so we have the corporation

a the stock yield ratio is 12.5

percent while corporation b the stock

yield ratio is 20

so as we can see on the table so

corporation b

has higher stock yield ratio than

corporation a

thus each peso will earn you more if you

invest in corporation b

than a if all things are equal then it

is why certain best incorporation

b let's move on to problem number four

determine the amount of the semi-annual

coupon for a bond with a pace value of

three hundred thousand pesos that pays

ten percent

payable semi-annually for its coupon

so first let's identify the given

so the given are the following the base

value is 300 000

the coupon rate or is equal to 10

and we want to find out the amount at

the semi-annual

coupon so take note that the amount of

the semi-annual coupon is 300

000 pesos that is the base value times

the rate

times one-half why one-half because this

is

and semi-annual meaning the same that is

half a year

so 300 000 times 10 times one half

this is equal to 15 000

pesos so the amount of the semi-annual

coupon is 15

000 pesos therefore so

the amount of the semi-annual coupon is

15 000

pesos so let's move on to

problem number five miss marie francisco

bought 51 000 pesos

accs bonds at 103.

what is your total investment in acts

spots

so first let's identify the market price

of one bond is actually 1.03

why 1.33 so take note that we have 103

here it means

that okay it is more than 100

so if we will divide 103 by 100 we will

come up with

1.03 times 1000 pesos because we have 1

000 pesos

worth of this month so this is equal to

1030 pesos so this is the market price

of

one bond now the total investment

is we have 50 okay once

so that is 1030 times 50 so this is

equal to 51

500 pesos so therefore

the total amount invested is 51

500 pesos

okay take note that when the bonds are

bought and sold

through a broker the broker charges a

broker's commissions or brokerage p

hence the amount of investment becomes

the market price of the bonds plus

the broker's commission let's consider

this problem number six

mrs dimaggiba owns 45 bonds with a par

value of 1000 pesos each

and pays eight and one hundred percent

interest

what annual income does mrs the magiba

get from this bonds

first let's identify the given

take note that the number of months is

45 well the par

value is 1000 and the rate is eight

and one half percent we want to find out

the rate of income for the yield now to

compute that

so the power value of 45 is 45 times

1000 pesos

that is equal to 45 thousand pesos

so the annual income that is equal to

part value

of number of months times three times

time

so we have actually 45 000 pesos

times okay this is the equivalent of

eight and one half percent or 0.085

times one year so therefore we can say

that

we have the total of 3 825

so the annual income for one year is 3

800 pesos

let's move on to problem number seven so

find the yield of one thousand pesos

nine percent tri-bond price at

ninety-four plus ten percent commission

so first we want to identify the

given so the given are the following the

power value

is 1000 pesos the commission is 10

okay pesos and the rate is nine percent

and we want

to find out the rate of income or what

we call

yield so let's have our step number one

so we have the annual income so we have

one thousand

times the rate times one year so that is

one thousand pesos times nine percent or

zero point zero nine times one

is equal to ninety next

so the amount invested is

actually market price plus the

commission

so we have the market price of 0.94

because that is 94 plus commission so we

have 0.94

meaning to say 94 out of 100 so that is

why we have

0.94 times 1000

plus 10 pesos so we have 940

plus 10 this is equal to 950 pesos

so this is the amount invested

the next step that we will do is we

would like to find out the yield or the

rate of

income take note that the rate of income

is the same as the annual income

divided by the annual interest so

we have here the annual income is 90

divided by our annual interest is 950

so this is equal to 0.09

or this is equal to 9.47

so therefore the yield of the investment

is 9.47 percent

or the triband corporation bond yield at

9.47

let's move on to market incest for

stocks and bonds

so 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 so investors and

financial managers use this

to describe the market and compare the

return on

specific investment so let's move on to

market indices for stocks and bonds so

as we can glean on the table so we have

the index

the value the change and the percent

change

so again so the value is the value

of the index that is ba all so let's say

we have the psei so that is the

philippine

stock exchange index so the value is

7523.93

so there is a change of 16.60

so the change is the change of the index

value from the previous day

so anyway if this means a green color

it means there is a positive change and

the percent change

is the ratio of the change of the index

to value

so we have 0.24 change

however if we will look on the

financials so we have the value of 1450

so there is a decrease of 38.87

it means there is a decrease of 2.6

the next thing that we will consider is

what we call the stock tables

okay so the 52 week high low

is actually the highest lowest selling

price of the stock in the past 52

weeks so absurd so if we have here the

stock a a

so we have here the highest is 94 what

the lowest is 44.

well the stock bbb has the highest of 88

while the lowest is 25 so

against a high low that is the highest

lowest selling price of the stock in the

last trading day

observed so aa has 60 as the highest

well the lowest is 35.5 while for bb we

have 45

and the lowest is 32.7 next the stock is

the three letter symbol of the company

is using poor trading

the next thing that we have on the stock

tables

is the volume by 100 so meaning to say

the number of shares

in hundred traded in the last trading

day

so this isn't in case stock 100

aaa sold two thousand fifty shares of

one hundred

which is equal to twenty thousand five

hundred shares

so the next one is the close closing

price of the last trading day so observe

that

for aaa we have 57.29

while for bbb is 45.70

next net change so the net change

between the last

or the two last trading days in the case

of

aaa so the net change is 0.10

so the closing price the day before the

last trading day is 57.29

minus 0.10 so this is 57.19

next thing that we will consider for the

index for buying or selling stocks is

we have this table so let's have what we

call the bid size

so observe that in the bid size this is

the number of individual

buy orders and the total number of

shares that we should buy

while the bid price and surprise buyer

are willing to pay for the stocks

say for instance in here in this uh

first

row we have 122 who are bidding for the

size

okay and the price is 25.60

while for those who are selling okay

there's only one who is willing to sell

okay the price of 21.6 of

20 000 shares

okay the next one is the what we call

the ask price

so the price the sellers of the stocks

are winning to sell to the stocks

and we have also the as uh as size

this is how many individual sell orders

have been placed in the

online platform and the total number of

shares

these sellers used to sell

and finally for our bond market in cess

we can say that the bond index

or bond market index is a method of

measuring the value

of the 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 so that ends our discussion on

the basic concepts on

stocks again this is teacher only this

month

thank you do not forget to subscribe to

my channel so that you will be notified

about my new

videos thank you