General Mathematics

Quarter 2 – Module 8:
Stocks and Bonds

CO_Q2_General Mathematics (SHS)_ Module 8

General Mathematics – Senior High School
Alternative Delivery Mode
Quarter 2 – Module 8: Stocks and Bonds
First Edition, 2020

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, stories, poems, pictures, photos, brand names,
trademarks, etc.) included in this module are owned by their respective copyright holders.
Every effort has been exerted to locate and seek permission to use these materials from their
respective copyright owners. The publisher and authors do not represent nor claim ownership
over them.

Published by the Department of Education

Secretary: Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio

Development Team of the Module

Writer: January B. Regio
Editors: Elizabeth D. Lalunio, Elizabeth B. Dizon, Anicia J. Villaruel, Roy O. Natividad
Reviewers: Fritz A. Caturay, Necitas F. Constante, Dexter M. Valle, Jerome A.
Chavez
Illustrators: Hanna Lorraine G. Luna, Dianne C. Jupiter
Layout Artists: Sayre M. Dialola, Roy O. Natividad, Noel Rey T. Estuita, Argie L. Ty
Management Team: Wilfredo E. Cabral, Job S. Zape Jr., Eugenio S. Adrao, Elaine T.
Balaogan, Hermogenes M. Panganiiban, Babylyn M. Pambid,
Josephine T. Natividad, Anicia J. Villaruel, Dexter M. Valle

Printed in the Philippines by ________________________

Department of Education – Region IV-A CALABARZON

Office Address: Gate 2 Karangalan Village, Barangay San Isidro

Cainta, Rizal 1800
Telefax: 02-8682-5773/8684-4914/8647-7487
E-mail Address: region4a@deped.gov.ph
General Mathematics
Quarter 2 – Module 8:
Stocks and Bonds
Introductory Message

This Self-Learning Module (SLM) is prepared so that you, our dear

learners, can continue your studies and learn while at home. Activities,
questions, directions, exercises, and discussions are carefully stated for you
to understand each lesson.

Each SLM is composed of different parts. Each part shall guide you
step-by-step as you discover and understand the lesson prepared for you.

Pre-tests are provided to measure your prior knowledge on lessons in

each SLM. This will tell you if you need to proceed on completing this module
or if you need to ask your facilitator or your teacher’s assistance for better
understanding of the lesson. At the end of each module, you need to answer
the post-test to self-check your learning. Answer keys are provided for each
activity and test. We trust that you will be honest in using these.

In addition to the material in the main text, Notes to the Teacher are
also provided to our facilitators and parents for strategies and reminders on
how they can best help you on your home-based learning.

Please use this module with care. Do not put unnecessary marks on
any part of this SLM. Use a separate sheet of paper in answering the exercises
and tests. And read the instructions carefully before performing each task.

If you have any questions in using this SLM or any difficulty in

answering the tasks in this module, do not hesitate to consult your teacher
or facilitator.

Thank you.

ii
CO_Q2_General Mathematics (SHS)_ Module 8
 What I Need to Know

Have you ever heard of stocks and bonds? Have you ever experienced to
borrow money from your parent or friend and had to pay it back with interest?

This module was designed and written for learners like you to describe how
stocks and bonds work. This lesson will also prepare you to be financially
independent and succeed in the near future.

In this topic, learners are expected to demonstrate an understanding of the

basic concepts of stocks and bonds. Learners should also be able to use appropriate
financial instruments involving stocks and bonds in formulating conclusions and
making decisions. After going through this module, you are expected to:
1. illustrate stocks and bonds; and
2. distinguish between stocks and bonds.

What I Know

Choose the letter of the best answer. Write the chosen letter on a separate sheet of
paper.
1. It is the money that is earned in trade or business after paying the costs of
producing and selling goods and services.
a. stock c. bond
b. profit d. investment

2. What is the other name for a bond's interest rate?

a. par value c. coupon rare
b. face value d. principal

3. A person or an entity that gives money or allocates capital with the expectation
of receiving financial returns.
a. entrepreneur c. politician
b. stockbroker d. investor

4. It is used to describe the ownership certificates of any company and is also

known as shares and equity.
a. bond c. stock
b. stockbroker d. commission

1
CO_Q2_General Mathematics (SHS)_ Module 8
5. A business formed to manufacture or supply products or services for profit.
a. stock c. stock
b. company d. bond

6. An activity in which money is put at risk for the purpose of making a profit.
a. Invest c. buy
b. sell d. collect

7. What is a bond’s coupon?

a. the purchase price of a bond
b. the interest earned to be paid by the bond issuer
c. the value of a bond at its issue date
d. the value of a bond at its maturity date

8. What is a bond?
a. a certificate of ownership in a corporation, with the right to a share of
the earnings
b. a payment from an investor to a corporation for the rights to future
profits
c. a group of stocks sold together for a set price
d. a certificate representing a loan from an investor to a corporation or
government entity

9. Why would someone buy a bond instead of a stock?

a. It is a less risky investment.
b. To have ownership in a company
c. It can yield a higher return on investment.
d. To receive dividend payments

10. What is a stock dividend?

a. a capital gain
b. the price the stock is sold for
c. part of the company’s profits that is paid to owners
d. the price paid when stock is sold to an investment bank

11. When people buy stock on a stock market…

a. the people selling the stock receives the money.
b. the corporation loses money.
c. the corporation receives the money.
d. the people buying the stock receives the money.

12. Which of the following best defines liquidity?

a. Investing in several different assets with unrelated risks.
b. The expenses of negotiating and executing an exchange.
c. The ability to convert a store of value to cash.
d. The amount that will be repaid at the end of a bond’s term.

2
CO_Q2_General Mathematics (SHS)_ Module 8
13. One-way people can earn money from stocks is by
a. selling the stock for a lower price than the price they paid for the stock.
b. buying stock from an investment banker.
c. selling the stock for the same price as they paid for the stock.
d. selling the stock for a higher price than the price they paid for the stock.

14. If the interest rate on bonds increases, which of the following is the most likely
result?
a. The supply of money decreases.
b. Bond prices increase.
c. The transaction costs associated with holding money increases.
d. People are willing to hold less wealth in the form of money.

15. All of the following are reasons to buy bonds EXCEPT:

a. Bonds generally have outperformed the stock market over the last 100
years.
b. Bonds pay out interest at set intervals, allowing people to live off the
income.
c. Bonds may outperform the stock market during certain periods of time.
d. Investing in bonds may generate less tax liability than investing in
stocks.

3
CO_Q2_General Mathematics (SHS)_ Module 8
 Lesson

1 Stocks and Bonds

Let’s say that it's time to invest your money. So, how exactly are you going to
allocate that money? After all, a well-diversified portfolio strategy is recommended
before you start to buy assets such as stocks and bonds. Indeed, stocks and bonds
are two of the most traded types of assets—each available for sale on several different
platforms or through a variety of markets or brokers. Here, we go over the primary
differences between stocks and bonds.

What’s In

Definition of Terms. Complete each statement by choosing the correct answer

in the given word box. Write the corresponding letter of each number on the blanks
to unlock the bible scripture.

Words to Treasure!

The L _ _ D is my sh _ _ _e r _ , I l _ _ k _othin_.
1 2 3 4 5 6 7 8 9 10

Psalm 23:1

a. stock market c. dividend d. stock

e. debtor or borrower h. interest g. bond
n. stockbroker o. market value p. principal
r. investor

1. The current price of a stock at which it can be sold is called _______________.

2. A person or institution who invests the money or make the funds available is
called _________________.
3. A person or institution who owes the money or avails of the funds from the
lender is called ___________________.
4. The amount of money borrowed or invested on the origin date is called
___________________.
5. The amount paid or earned for the use of money is called ___________________.
6. A stake of ownership in a company that is sold off in exchange for cash is
called _______________________.

4
CO_Q2_General Mathematics (SHS)_ Module 8
 7. An equity market where regular activities of buying, selling, and issuance of
shares of publicly-held companies take place is referred to as ________________.
8. A sum of money paid by a company to its shareholders out of its profits is
called ____________________.
9. An investment adviser who executes buy and sell orders for stocks and other
securities on behalf of clients is called as _______________________.
10. A debt that the company or entity enters into with the investor that pays the
investor interest on that debt is referred to as ________________________.

Notes to the Teacher

This module will help you to teach your students the importance of
stocks and bonds and how will you positively influence them on
investment decisions and to be financially literate. You can also
prepare additional activities, resources, videos to feed additional
inputs as you may feel appropriate that will deepen the learners
understanding.

What’s New

Read carefully the lyrics of the song, you may sing the song in the tune of
“Row, row, row your boat” to emphasize how people can save with stocks and bonds.

Stocks and Bonds

Stocks, stocks, stocks are shares

That pays a dividend.
Gradually, gradually, gradually, gradually
Investing then you earn.

Stocks, stocks, stocks, they change

The price goes low or high.
Gradually, gradually, gradually, gradually
Money goes round and round.

Bonds, bonds, bonds are loans

That pay an interest
Gradually, gradually, gradually, gradually
Growing while you wait.

5
CO_Q2_General Mathematics (SHS)_ Module 8
Questions to Ponder

1. Based on the given song, can you define stocks? How about bonds?
2. Distinguish the difference between stocks and bonds?
3. Between stocks and bonds, which do you prefer to invest your money? Why?

What is It

Stocks and bonds are the heartbeat of the economy. Much of the world's
business activity would be impossible without stocks and bonds. But whether you
trade on the Philippine Stocks Exchange, financial terms can always be confusing.
So, before you invest in a stock or a bond, you need to know - what is the difference?
And which one should you choose?
Stocks and bonds are certificates that are sold to raise money for starting a
new company or for expanding an existing company. They are also called securities,
and people who buy them are called investors.

STOCKS

Companies sell shares of ownership in their company to raise money to

finance operations, plan expansion, and so on. These ownership shares are called
stocks. The buyers of the stock (stockholders) receive stock certificates verifying
the number of shares of stocks they own. The two basic types of stocks are common
stock and preferred stock.

Common stockholders have voting rights. Preferred stockholders do not have

voting rights, but they receive preference over common stockholders in dividends
(payments from profit) and the company’s assets if the company goes bankrupt.
Stock Market provides an orderly trading place for stock wherein prices or market
value vary from day to day and within a day. Only stockbrokers who specialize to
work in the stock market can trade on the floor. The broker receives a commission
for the services of both buying and selling stocks.

BONDS

Sometimes companies raise money by selling bonds instead of stock. When

you buy a stock, you become a part-owner in the company. To raise money,
companies may not want to sell more stocks and thus dilute the ownership of their
current stock owners, so they sell bonds. A bond is a form of long-term investment
issued by a corporation or government where the purchaser becomes a creditor of
the company. It represents a promise from the company to pay the face amount to

6
CO_Q2_General Mathematics (SHS)_ Module 8
the bond owner at a future date, along with interest payments at a stated rate. The
company, state or municipality that issues the bond is called the issuer.

The annual interest paid by the issuer to the lender (bond holder) on the bond
is referred to as the coupon. The coupon rate is the annual payout as percentage
of the bond’s par value. Bonds have two kinds of values. These are par value and
market value. The par value of the bond is the same as its face value while the
market value of a bond is the price at which the bond is being sold. It may be greater
than or less than the amount of the par value. If the market value is greater than
the par value, then the bond is selling at a premium. If the market value is less than
the par value, then the bond is selling at a discount.

Now I know!
Investors are always told to diversify their portfolios between stocks and
bonds, but what’s the difference between the two types of investments? Here's a look
at the difference between stocks and bonds on the most fundamental level.

Basis for
Stocks Bonds
Comparison
A form of equity instrument or A form of debt instrument or
raising money by allowing raising of money by borrowing
Definition
investors to be part owners of from investors.
the company.
Government Institutions,
Issuers Corporates Financial Institutions,
Companies etc.
Status of Shareholders are the owners of Bondholders are the lenders to
Holders the company. the company.
Profits earned by the company Interest payments are made in
Form of
are paid in the form of the form of Coupon Payments.
Returns
Dividends.
The risk level is high since it The risk level is relatively low
depends upon the performance since bondholders are prioritized
Risk Level
of the issuer, so no guaranteed for repayments.
returns.
Major Risks Market Risk, Business Risk Interest Rate Risk, Inflation Risk
Associated
Shareholders get the right to Bondholders get the preference
Additional
vote. in terms of repayment and on
Benefit
liquidation.
When interest rates fall When market interest rates
Market
significantly, the market stock decrease, the market value of an
Value
value rises. existing bond increases.

7
CO_Q2_General Mathematics (SHS)_ Module 8
 What’s More

Group the following characteristics of stocks and bonds and write on the space
provided.

 offers fixed interest rate

 makes profit by dividend
 debt instrument
 equity instrument
 own a small piece of the company
 sold by Government and financial institution
 lower risk with lower reward
 higher risk but with higher reward
 market value varies everyday
 has a maturity date

Stocks Bonds

What I Have Learned

Complete the following statements by writing the correct word or words.

1. When a company goes to sell a _______________________, they decide to

sell a certain amount of shares of ownership in their company that they
will give up in exchange for cash from investors.

2. A stock is a security in that company that can also be referred to as

equity or a ________________________.

3. Those who own ___________________ stock in a company typically have

voting rights in shareholder's meetings and may even receive dividends,
while ______________________ stock owners do receive dividends but
don't always receive voting rights.

8
CO_Q2_General Mathematics (SHS)_ Module 8
 4. _____________________ are fixed-income investments, which operate off
of a fixed interest rate and a fixed amount of time wherein the company,
government, or other will repay the money plus the interest.

5. A ________________________ represents a collection of shares in a

company which is entitled to receive a fixed amount of dividend at the
end of relevant financial year, whereas ________________________ is
associated with debt raised by the company from outsiders which carry
a fixed ratio of return each year and can be earned as they are generally
for a fixed period of time.

What I Can Do

Perform the task below.

Suppose you have savings in the bank that you want to invest in stocks and
bonds instead of setting up in a new business. Write one to two paragraphs
discussing what method you can use to make the investment and explain the reasons
for your decision.

Content Area Rubric

 Use of the skills of evaluation, analysis, and synthesis is
apparent.
3  Sound reasoning is employed.
 Appropriate and accurate specific examples are cited and
Explained.
 Use of the skills of synthesis and analysis is apparent.
 Reasoning employed is on the inferential level.
2
 Appropriate examples are cited and explained, however, some
inaccurate information is included.
 Use of literal skills is apparent.
 Reasoning employed is on the concrete level.
1
 Some examples may be cited, may attempt to be explained,
and inaccurate information is included.
 There is little or no evidence of any apparent skills.
0  There is little or no evidence of any reasoning employed.
 Examples, if cited, are inaccurate or inappropriate.

9
CO_Q2_General Mathematics (SHS)_ Module 8
 Assessment

Choose the letter of the best answer. Write the chosen letter on a separate sheet of
paper.
1. What is another term for stock?
a. bond c. debt instrument
b. debenture d. equity instrument
2. It is a type of stock for which stockholders get first choice in distributed profits.
a. common stock c. face value stock
b. stock market d. preferred stock
3. Another term for a bond’s face value.
a. par value b. maturity
b. coupon d. final payment
4. A bond that pays all of its interest and principal at the bond’s maturity date.
a. bond fund c. coupon bond
b. par-value fund d. zero-coupon bond
5. Which financial assets carries the most risk?
a. bond c. savings deposits
b. stock d. checking deposits
6. Which is the LEAST risky investment?
a. stocks c. Philippines treasury bonds
b. corporate bond d. mutual funds
7. A person or agent who trades for you and charges a fee or commission for
executing buys and sells of stocks through a stock exchange.
a. stockbroker c. entrepreneur
b. stockholder d. politician
8. What is stock portfolio?
a. The online tool used to track stock prices.
b. A list of all the stocks you own.
c. The document that you receive for purchasing stock.
d. A group of stocks that you can purchase at one time on a stock
exchange.
9. Why do people buy stocks?
a. There is no chance of a loss.
b. They expect to earn a return.
c. The government encourages them to buy stock.
d. They are guaranteed interest payment each year.
10. What is the best explanation of a bond?
a. It is an ownership interest in a company.
b. It is an equity or share in a company.
c. It represents a corporate or government debt obligation.
d. It is a debt instrument.

10
CO_Q2_General Mathematics (SHS)_ Module 8
 11. Diversifying can occur by
a. buying different stocks and bonds in different industries.
b. buying similar stocks and bonds in the same industries.
c. buying similar stocks and bonds in different industries.
d. buying different stocks and bonds in the same industries.
12. Which best defines the risk of a financial asset?
a. Investing in several different assets with unrelated risks.
b. The amount that will be repaid at the end of a bond’s term.
c. The probability that an asset will lose value.
d. The uncertainty that an asset might gain or lose value.
13. Why would someone choose to put money in stocks as opposed to a savings
account that earns interest?
a. They are guaranteed a return in stocks.
b. There is a potential to earn more money in the stock market.
c. They are guaranteed a return in a savings account.
d. There is a potential to earn more money in the savings account.
14. What happens to the price and interest rate of a bond if the demand for that
bond increases?
a. Price increases; interest rate is unaffected.
b. Price is unaffected; interest rate is unaffected.
c. Price increases; interest rate decreases.
d. Price decreases; interest rate decreases.
15. Several years ago, Company A issued bonds to raise funds so that it could buy
equipment. Those bonds were purchased by the Bank of the East. However,
the Bank of the East has decided that it doesn’t want to have any assets in
the form of bonds, so it is selling off all the bonds that it owns. Which of the
following is most likely to be the result of this action?
a. The default risk of the bonds will increase.
b. Bond prices will increase.
c. The face value of the bonds will decrease.
d. Interest rates will increase.

Additional Activities

Journal Writing
Write a journal on the saying “Do not put all your eggs in one basket” by
relating the lesson on stocks and bonds.

11
CO_Q2_General Mathematics (SHS)_ Module 8
CO_Q2_General Mathematics (SHS)_ Module 8
12
Assessment What I Have
1. d
Learned
2. d
1. stock
3. a
4. c
2. share
5. b 3. common,
6. c preferred
7. a 4. bond
8. b 5. stock, bond
9. b
10.c
11.a
12.d
13.b
14.c
15.c
What’s More What's In What I Know
Stocks: 1. o 1. b
2. r 2. c
 makes profit by dividend 3. e 3. d
 equity instrument 4. p 4. c
 own a small piece of the 5. h 5. b
company 6. d 6. a
 higher risk but with higher 7. a 7. b
reward 8. c 8. d
 market value varies 9. n 9. a
everyday 10.g 10.c
11.a
Bonds: 12.c
13.d
 offers fixed interest rate 14.d
 debt instrument 15.a
 sold by Government and
financial institution
 lower risk with lower
reward
 It has a maturity date
Answer Key
References

Aunzo, Rodulfo, Flores Maricar, Gagani Ray Ferdinand M, and Quennie Ypanto.
2016. General Mathematics Activity-based, Scaffolding of Student . Quezon
City: C&E Publishing, Inc.
2016. General Mathematics Learner’s Material . Meralco Avenue, Pasig City,
Philippines 1600: Lexicon Press Inc.
2016. General Mathematics Teacher’s Guide. Meralco Avenue, Pasig City,
Philippines 1600: Lexicon Press Inc.
Oronce, Orlando A. 2016. General Mathematics. Sampaloc, Manila: Rex Bookstore,
Inc.

13
CO_Q2_General Mathematics (SHS)_ Module 8
For inquiries or feedback, please write or call:

Department of Education - Bureau of Learning Resources (DepEd-BLR)

Ground Floor, Bonifacio Bldg., DepEd Complex

Meralco Avenue, Pasig City, Philippines 1600

Telefax: (632) 8634-1072; 8634-1054; 8631-4985

Email Address: blr.lrqad@deped.gov.ph * blr.lrpd@deped.gov.ph