11

Republic of the Philippines

uarter
Department of Education
Regional Office IX, Zamboanga Peninsula

11 Zest for Progress

Z Peal of artnership

General Mathematics
Quarter 2 – Module 5
Stocks and Bonds

Name of Learner: ___________________________

Grade & Section: ___________________________
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Name of School: ___________________________
General Mathematics – Grade 11
Alternative Delivery Mode
Quarter 2 - Module 5: STOCKS AND BONDS
First Edition, 2019

Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the
Government of the Philippines. However, prior approval of the government agency or
office wherein the work is created shall be necessary for exploitation of such work for
profit. Such agency or office may, among other things, impose as a condition the payment
of royalties.
Borrowed materials (i.e., songs, poems, pictures, photos, brand names, trademarks, etc.)
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copyright owners. The publisher and authors do not represent nor claim ownership over
them.

Published by the Department of Education

Secretary:
Undersecretary:
Assistant Secretary:

Development Team of the Module

Writer’s Name: DOMINADOR J. ALIÑO

Editor’s Name: PACIANO E. RECABO

Reviewerr’s Name: ISMAEL K. YUSOPH

Management Team: MA. LIZA R. TABILON

LOURNA I. POCULAN

LILIA E. ABELLO

EVELYN C. LABAD

MA. THERESA M. IMPERIAL

NORALYN R. SABANAL

PACIANO E. RECABO
2
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General Mathematics
Quarter 2 – Module 5:
Stocks and Bonds

3
 Lesson
5 Stocks and Bonds

What I need to know

This module will give you conceptual details about stocks and bonds which are both long
term financial instruments. You will be introduced to the definitions of and the difference
between the two financial instruments. The markets where stocks and bonds operate will
be discussed, including the market participants and the process involved. This module will
also provide you with an overview of the market indices of stocks and bonds.

After going through this module, you are expected to :

1. illustrate stocks and bonds ;

2. distinguish the difference between stocks and bonds;

3. describe the different markets for stocks and bonds; and,

4. analyze the different market indices for stocks and bonds.

What’s in

Activity 1
Entry Card
A. Calculate the gain or loss for each item and record your answer in the fourth
column under “Change in Price.” In the fifth column, write whether the change
in price is a gain or a loss.

Item Price Bought Price Sold Change in Price Gain or

Loss
1 P 1,445.20 P 1,480.40 P34.80 Gain
2 P 496.80 P 490.80
3 P 215.60 P 240.80
4 P 1,193.20 P 1,150.00
5 P 379.20 P 600.00
B. Multiply the Number of Items by the Price Per Item to calculate the total Cost of the
4
 Items.

Item Number of Price Per Item Total Cost of the Items

items
6 400 P89.60
7 260 P50.80 P 13,208.00
8 70 P382.00
9 540 P164.00
10 75 P124.00

What’s New

Solve and show your solution.

Find the interest charged on a simple interest loan of P 68,000.00 at 12.5% rate for 320
days.

What is it

What are Stocks?

Stocks are defined as shares of ownership in a corporation. Most of the

corporations listed in a stock exchange house are the top tier corporation. Therefore, if the stock
market is in a good state, it summarizes the general economy of a country. Stocks, as compared
with bonds, are almost the same in nature except that stocks are limited only to investment in
corporations. These corporations sell their shares of stock for the purpose of raising capital funds
or to finance their expansion and operational requirements.

Definition

Commission is a payment to an agent or sales person based on the value of

quantity of goods bought and sold; broker’s or brokerage fee. A commission is
found by finding the percentage of a sale.
Example 1
Tony sells T-shirts on weekends. He is paid a straight commission of 3% on his sales. In
April, his sales amounted to Php 15,000.00. How much was his commission?

Solution
Commission = 3% of the total sales
= 0.03 x P 15,000.00
= Php 450.00
Tony received Php 450.00 commission.

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 Example 2
Lisa received a commission of Php 11,000.00 on a sale of Php 200,000.00. What was
her rate commission?

Solution
To get the rate of commission, divide the amount of commission by the amount of sales.
11,000.00 11
= 200 = 0.055 or 5.5%
200,000.00

Example 3
Martin receives a 6% commission on all items sells. If his last week’s commission was
Php 7,500.00, what was his total sales?

Solution
To find Martin’s total sales, divide the commission by the rate of
7,500.00
= Php 125,000.00
0.06

Martin’s total sales was Php 125,000.00

Investors who buy the shares of the corporation from the bank are called
shareholders or stockholders. This is when the company gets its money to grow. A
stockholder gets a stock certificate showing the number of shares it represents.
Example:
Mr. Aaron Agbuya owns 100 shares out of 40 000 shares. Thus, he owns
𝟏𝟎𝟎 𝟏
= 0.0025 =
𝟒𝟎𝟎𝟎𝟎 𝟒
of the Exponent One Corporation. As part-owner of the corporation, Mr. Agbuya is entitled
to any profit that the Corporation makes. When companies decide to raise money by
selling stocks, they generally go to a big investment bank. The bank handles the Initial
Public Offering or IPO before it becomes available on a stock exchange.
Each certificate is registered in the owner’s name of the corporation. Since Mr. Agbuya
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bought a share of stock, he owns a part of the corporation ( 4% of the corporation). The
profit that the corporation gives to Mr. Agbuya is called dividends. Dividends are usually
paid quarterly. Dividend may also be paid semi-annually. There are times when no
dividends are paid. However, shareholders took the risk with the company since they
know that the only get dividends when the company makes profit.

Figure 1. Stock Certificate

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Definition

Stock Certificate – a paper issued to a shareholder which shows on its face the number
of shares it represent.
Shareholders or stockholder – one who owns shares of corporation stock.
Dividend – earnings distributed to shareholders of a corporation.
Certificate number – an accession number or placeholder to keep track of the number of
certificates.
Par Value – the face value of the bond or stock.
No-par Stock – stock issued without a stated value on the certificate.
Market Price – the price at which a stock on bond is sold.
Preferred Stock – type of stock for which stockholders get first choice in distributed
profits.
Common Stock – the ordinary stock of a corporation, paying no specified rate or amount
of dividend.
Initial Public Offering (IPO) – stock sold before it is available on a stock exchange.

1.Market Risk. This is the most difficult risk to analyze and calculate. Market risk encompasses events
not just domestically but also internationally that may affect the market value of the stocks.
2. Default Risk. This happens when an investor only puts all his money in just one basket or company.
The risk here is you are only counting on one company and your earnings will depend only on this.
3. Guarantee of Principal Risk. Investing in stocks is not the same as saving in banks where there is
usually a
deposit insurance of up to P 500 000 per depositor under the Philippine Deposit Insurance Corporation
(PDIC)
4. Inflationary Risk and Interest Rate Risk. These risks are associated with a company’s growth
potential which has a domino effect on its stockholders corporation (PDIC).on this (which could be
higher rather than diversifying it).

Formula

Total Cost of Stock = Market Price + Commission

Example 4
Rowena bought 100 shares of Paper Mill stock at P 150.00 per share. The broker
charged her P 750.00 commission. Find the total cost of the stock.

Solution
Market price: 100 x P 150 = P 15,000.00 (no. of shares x par value)
Broker’s Commission: P 750.00 (market price + commission)
Total Cost: P 15,750.00
Example 5
Find the total cost of each stock purchase below.

No. of Shares Name of stock Market Price per Commission

share
a. 1 000 ANI P 1.75 P 75.00
b. 2 000 COAL P 0.94 94.00
c. 500 FGEN 30.55 763.50

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 Solution

Market Price + Broker Total Cost

(No. of shares x s
Market Price/Share) Comm
ission
a 1 000 x Php 1.75 = Php + Php Php
. 1,750.00 75.00 1,825.00
b 2 000 x Php 0.94 = Php + Php Php
. 1,880.00 94.00 1,974.00
c 500 x Php 30.55 = Php + Php Php
. 15,275.00 763.50 16,038.50

Stock income Dividends

The income the stockholder receives from his investment is the amount of dividend he gets. The
amount of dividends paid by the company depends on the profit the company makes. The dividend may
be shown either as a percent of the par value of the stock or as an amount of money per share.
For example, the Exponent One Corporation in the activity declared a dividend of 112 % of the
par value. Since the par value of the shares is P 50, the amount of dividend on each share is 112 % of P50
or P0.75. The Exponent One Corporation may declare either a dividend of 112 % or a dividend of P0.75
per share. Thus, Mr. Aaron Agbuya who owns 100 shares of Exponent One Corporation will receive a
total dividend of P75.00 (P0.75 x 100 = P 75.00)

The rate of income on a stock investment is the ratio of the annual dividends to the total cost of
stocks.

𝑨𝒏𝒏𝒖𝒂𝒍 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔
Formula Rate Income =
𝑻𝒐𝒕𝒂𝒍 𝑪𝒐𝒔𝒕 𝒐𝒇 𝑺𝒕𝒐𝒄𝒌

If Robert owns a share of stock that costs P960 and pays quarterly dividend of P 22.40,
the rate of income is 913 %.
Rate of Income = 22.40 x 4 = 0.0933 or 𝟗𝟏𝟑
960
Example 6
Ramon owns 75% shares of D&E common stock, par value P 400.00 If the corporation
declares a 714 % dividend, what is the total dividend that Ramon should get?

Solution
Dividend per share: 0.0714 x P 400 = P 29 dividend on one share
Total dividend : 75 x P29 = P 2,175.00

Selling Stocks
Another way shareholder earns an income is to sell his stock. A broker may be used to buy or sell
stocks. The broker’s representatives take charge of the investor’s order. However, selling stock will either
make a profit, break-even, or take a loss. A profit, break-even or loss depends on the total cost of the stocks,
the selling price of the stock, and the expenses in selling the stock. Some expenses to be considered are
commission of the broker, small SEC (Securities and Exchange Commission) fees, and sometimes transfer
tax. After deducting all the expenses from the market 8 price of the stock, the money that you will receive is
called net proceeds.
 Formula
Net Proceeds = Market Price - Expenses

What are Bonds?

What first comes to your mind when you encounter the financial term BOND? When a
potential depositor wants to save or invest, he or she gives the investable funds to a party of interest
which could be either a financial institution or a retail or corporate borrower. The common
investments are in the form of a deposit to a bank or a palawagan contribution to a cooperative or
credit union. The concept of bond is almost the same. When you purchase a bond, you are lending
money to a government, city, corporation, or any other entity known as an issuer. In return for that
money, the issuer provides you with a bond in which it promises to pay a specified rate of interest
during the life of the bond, and to repay the face value of the debt (the principal) when it matures or
comes due. Bonds can also be referred to as bills, notes, debt securities, or debt obligations

VARIOUS TYPES OF BONDS

1.Corporate bond – are bond issued by the most established corporation.
2.Secured bonds – are bonds that are backed up by corporate collaterals that have substantial value
such as property, plant, or equipment.
3.Unsecured bonds – are not collateralized by any substantial corporate asset.
4.Convertible bonds – are bonds that can be interchanged with shares of stocks.
5.Collable bonds – are bonds that can be recalled or redeemed by the issuer even before the bonds
mature

Definition

Loan – is an arrangement in which a lender gives money (principal) to a borrower in

exchange for the future repayment of the principal along with interest or other finance
charges.

Example 7
Find the future value of P 145,000.00 invested at a 912 % interest rate for 1 year and 9
months.

Solution
Given P = P 145,000.00, r = 912 % =9.5% = 0.095 , and t = 1 year and 9 months or 134 year
7
= 4 year.
Applying the Future Value formula, we have
FV = P(1+rt)
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= P 145,000.00(1 + 0.095 x4)
= P 169,106.25
Note: An investor may be thought of as one who takes the risks of setting up a business in
hopes of making a profit.

A BOND is a form of long-term investment issued by a corporation or government

where the purchaser becomes a creditor of the company. People who buy a bond are
lending money to the corporation from which they buy the bond. Hence, a bond is very
much like a loan. When a corporation is selling a bond, it is really selling an IOU, which is
a promise to payback the buyer his money, plus interest at a particular time.

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 There are several reasons for issuing bonds. For example, the Association of
Celebrities and Talents Society (ACTS) Corporation want to borrow P 50,000,000.00 for 5
years for the expansion of their business. So, it issues 50,000 5-year bonds with a face
value of P 1,000.00 each. The entire issue is often sold to an investment banking house,
the bank then sells the bonds to investors at a slight increase in price over what is paid for
them. In this particular case, the banking house may buy then for ACTS Corporation at P
995.00 each and then sell them at P 1,000.00 each to the investors.

Figure 2. BONDS Certificate

Example 8
Ms. Johanna Vista bought fifty P 1,000.00 ACTS bonds at 103. What is her total
investment in ACTS bonds.

Solution
Market Price of 1 bond: 1.03 x P 1000 = P 1,030.00
Total investment: P 1,030.00 x 50 = P 51,500.00

When bonds are bought and sold through a broker, the broker charges a broker’s
commission or brokerage fee. Hence, the amount of investment becomes the market price
of the bonds plus the broker’s commission.
Example 9
John Alfonso bought five P 1,000.00 MacQue Outback Corporation bonds at 92 plus P
10.00 commission per bond through a broker. What is John’s amount of investment?
Solution
Market price of a 1 bond: (1.92 x P 1 000.00) = P 920.00
Market Price of 5 bonds : (P 920 x 5) = 4,600.00
Commission on 5 bonds: (P 10 x 5) = 50.00
Total investment: (P4,600.00 + P50.00) = P 4,650.00

The Bond Market

The bond market in the Philippines is not yet as popular as the stock market.
The Philippine government, through the Bureau of Treasury (BTr), is the largest
issuer of Philippine bonds. They offer their flagship products – retail treasury bonds

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 (RTBs) and regular treasury bonds.
Treasury bonds are government securities which mature beyond one year. At
present, there are five maturities of bonds: 2 years, 5years, 7 years, 10 years and
20 years. These are sold at their face value on origination.
The yield is represented by a coupon, which is expressed as a percentage of
the face value on per annum basis, payable semiannually. The RTBs are designed
to be a safe, high-yielding, and affordable savings instrument. They are considered
risk-free because they are the direct, unconditional, and general obligation of the
Republic of the Philippines.

Bond Income
The interest given by the corporation as a government unit who issued the bond serves as the
income from the bond. The interest of the bond is based on the par value serves as the principal, the
interest formula can be calculated as:

Formula
Interest = Par Value x Rate x Time
The interest for five years on a Php 1,000.00 par value, 10% bonds would be Php 500.00.

Interest = Php 1,000.00 x 0.1 x 5 = Php 500.00

500
If the interest is paid semi-annually, the amount of each interest for the said bond is (2)(5)
or Php 50 semi-annual interest.
Formula

𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆
Rate of income = 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕

Note: Rate of income is often called YIELD.

Example 10
Find the yield on Php 1,000 , 9% ACTS bond priced at 94 plus Php 10 commission.
Solution

Annual income : Php 1,000.00 x 0.9 x 1 = Php 90.00

Amount invested: Market price + Commission
(0.94 x Php 1,000.00 + Php 10.00 =
Php 940.00 + Php 10.00 = Php 950.00
90
Yield (rate of income) = = 0.0947 = 47%
950
The yield on the investment is 47% or ACTS Corporation bond yields 47%

What’s More

Activity 2

Find the total cost of the following if the brokerage fee is 2%

a.100 shares at Php 900 per share

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b.100 shares at Php 248 per share
c. 700 shares at Php 720 per share
d. 500 shares at Php 510 per share
e. 250 shares at Php 650 per share

Activity 3
Write T if the statement is true and F if it is false. Write your answer on the space provided
before each number. Not following instruction means wrong.
_______1. The price people pay for a stock is called a dividend.
______ 2. More American own mutual funds than individual stocks and bonds.
_______3. Corporation can raise money for their corporation by working with investment bankers
to issue stock.
_______4.People who own stocks are guaranteed a return on the money they have invested in
stocks.
_______5.The only way stockholders make money is through dividend payments while they own
the stock.
_______6. For mutual funds, the higher the load, the less the actual investment made on behalf of
the investor.
_______7. Stocks represent ownership in a corporation.
_______8. The New York Stock Exchange and NASDAQ are considered primary markets.
_______9. One way stockholders make money is by selling their stocks for money than they paid
for it.
_______10. Stockholders can reduce the risk on their stock investment by diversifying their
portfolios.

Activity 4.

Apple sells machinery on weekends. She paid a straight commission of 4% on her sales.
In August, her sales amounted to Php 25,000.00. How much was her commission?

What I have Learned

(Vocabulary and Concept). Match the terms in Column A to the statements in

Column B by drawing a line.
A B
1 Stock certificate a.Stock without par value
.
2 Shareholder b.a dealer in stocks and bonds
.
3 Dividends c.selling price of stocks
.
4 Market price d.a paper showing shares owned
.
5 No-par stock e.rate of income on bonds
.
6 Broker f.a fee charged by a broker
.
7 Yield g.anyone who owns stocks
.
8 Broker’s commission h.profit distributed to stockholders
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 .

What I can Do

Solve the problem below:

On March 25, 2014. Arnold bought 300 shares of MACQ at Php 400.00 per share. He
sold half of his shares on April 20,2014 at a price of Php 420.00 per share. How much
money did he gain or lose on the investment (Ignore brokerage fee)?

Generalization

You encountered a lot of concepts related to stocks and bonds. Now it’s time to pause for
a while and reflect at your learning process by filling in the boxes below.

One way people can earn money from stocks is by…

Why would someone buy a bond instead of a stock?

Why would someone choose to put money in stocks as opposed to a savings account
that earns interest?

Additional Activities

Let us check how much you know about stocks and bonds.

Direction: Analyze and solve the following and write this on your answer sheet. Choice the best
answer and write the letter only.

1. Tom bought 50 share of MacTec stock at Php685.00 per share and paid Php956.00
commission. Find Tom’s total investment.
a. 𝑃hp 53,206.00 c. 𝑃hp 35,026.00
b.𝑃hp 35,206.00 d. 𝑃hp 35,602.00
2. Rose bought 400 shares of SBC stock at its 52-week low, Php 781.20 per share, and sold at
52-week high, Php 1,310.00 per share. How much did Rose make on this transaction, dividends
not included?
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 a. 𝑃 hp195,232.00 c. 𝑃hp 159,232.00
b. 𝑃hp 211,520.00 d. 𝑃hp 112,520.00
3. Rose bought 400 shares of SBC stock at its 52-week low, Php 781.20 per share, and sold at
52-week high, Php 1,310.00 per share. Find the broker’s commission if the broker charges 3.2% of
the total sale price.
a. 𝑃hp 61,786.00 c. 𝑃hp 16,786.00
b. 𝑃hp 61,768.00 d. hp𝑃 16,768.00
4. Gerald bought 250 shares of LOV stock at its 52-week low, Php735.00 per share, and sold
at 52-week high, Php 1,448.80 per share. How much did Gerald make on this transaction,
dividends not included?
a. 𝑃hp 169,395.00 c. 𝑃hp 169,953.00
b. 𝑃hp 166,395.00 d. 𝑃hp 169,359.00
5. Gerald bought 250 shares of LOV stock at its 52-week low, Php735.00 per share, and sold
at 52-week high, Php 1,448.80 per share. Find the brokers commission if the broker charges 2.5%
of the total sale price
a. 𝑃hp 9,505.00 c. 𝑃hp 9,055.00
b. 𝑃hp 9,050.00 d. 𝑃hp 9,550.00

REFERENCES

 Dr. Debbie Marie B. Verzosa, Francis Nelson M. Infante ,Paolo Luis Apolinario, Jose
Lorenzo M. Sin, Regina M. Tresvalles, Len Patrick Dominic M. Garces. SHS General
Mathematics Learner’s Material First Edition 2016
 Albay, Eduard M., Batisan, Ronaldo S., Caraan, Aleli M., Sumagit, Katrina Grace Q. 2016.
General Mathematics Module.DIWA Senior High School Series
 Oronce, Orlando A. First Edition 2016. RBS General Mathematics

ANSWER KEY
Activity 1:

Entry Card
A. Calculate the gain or loss for each item and record your answer in the fourth
column under “Change in Price.” In the fifth column, write whether the change in
price is a gain or a loss.

Item Price Bought Price Sold Change in Price Gain or

Loss
1 P 1,445.20 P 1,480.40 P34.80 Gain
2 P 496.80 P 490.80 P 6.00 Loss
3 P 215.60 P 240.80 P 25.20 Gain
4 P 1,193.20 P 1,150.00 P 43.20 Loss
5 P 379.20 P 600.00 P 220.80 Gain

B. Multiply the Number of Items by the Price Per Item to calculate the total Cost of
the the Items.

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 Item Number of Price Per Item Total Cost of the Items
items
6 400 P89.60 P 35,840.00
7 260 P50.80 P 13,208.00
8 70 P382.00 P 26,740.00
9 540 P164.00 P 88,560.00
10 75 P124.00 P 9,300.00

Activity 2

Find the total cost of the following if the brokerage fee is 2%

a. 100 shares at P 900 per share
Market price (P 900.00 x 100) = P 90,000.00
Add: Commission (P 90,000.00 x 2%) = 1,800.00
Total cost P 91,800.00
b.100 shares at P 249 per share
Market price (P 249.00 x 100) = P 24,800.00
Add: Commission (P 24,800.00 x 2%) = 496.00
Total cost P 25,296.00
c.700 shares at P 720 per share
Market price (P 720.00 x 700) = P 504,000.00
Add: Commission (P 504,000.00 x 2%) = 10,080.00
Total cost P 514,080.00
d. 500 shares at P 510 per share
Market price (P 510.00 x 500) = P 255,000.00
Add: Commission (P 255,000.00 x 2%) = 5,100.00
Total cost P 260,000.00
e. 250 shares at P 650 per share
Market price (P 650.00 x 250) = P 162,500.00
Add: Commission (P 162,500.00 x 2%) = 3,250.00
Total cost P 165,750.00
Activity 3
1. F 6. T
2. T 7. T
3. T 8. F
4. F 9. T
5. F 10.T
Activity 4

Apple sells machinery on weekends. She paid a straight commission of 4% on her sales.
In August, her sales amounted to P 25,000.00. How much was her commission
Solution: (P 25,000.00 x 4%) = P 1,000.00
Additional Activities

1) B 2) A 3) D 4) A 5) C

Congratulations! You have finished the whole lesson.

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