Basic Concepts of Stocks and Bonds || Grade 11 General Mathematics
Summary
TLDRThis 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
📈 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.
📊 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.
💼 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.
📉 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.
🌐 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.
Mindmap
Keywords
💡Stocks
💡Bonds
💡Dividends
💡Stock Valuation
💡Market Value
💡Stock Yield Ratio
💡Coupon Rate
💡Par Value
💡Stock Market
💡Risk and Return
💡Bond Market
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
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