Stocks and Bonds Overview

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Questions and Answers

What is a stockholder?

  • An individual or entity that owns shares of stock (correct)
  • A broker facilitating stock transactions
  • A person who invests in bonds
  • A company that issues shares

Which type of stock is known for higher dividend payments to investors?

  • Growth Stock
  • Cyclical Stock
  • Income Stock (correct)
  • Defensive Stock

What does 'par value' refer to in the context of bonds?

  • The market value after selling
  • The selling price chosen by a broker
  • The amount of interest paid periodically
  • The price assigned by the issuer as the principal amount (correct)

Which type of stock is typically associated with small companies?

<p>Small-cap Stock (D)</p> Signup and view all the answers

What does 'dividend in arrears' signify?

<p>Unpaid dividends accumulating over periods (A)</p> Signup and view all the answers

Which stock type is least affected by economic trends?

<p>Defensive Stock (B)</p> Signup and view all the answers

What characterizes a blue-chip stock?

<p>Stable earnings from well-established companies (A)</p> Signup and view all the answers

What is the primary role of a broker in stock transactions?

<p>To arrange transactions between buyers and sellers for a commission (B)</p> Signup and view all the answers

How much are the dividends per share of common stock if a corporation sold 300,000 shares and declared a total dividend of Php 30,000,000?

<p>Php 10.00 (D)</p> Signup and view all the answers

What is the total dividend due to preferred stock shareholders if there are 50,000 shares of preferred stock paying Php 50.00 per share from a total declared dividend of Php 20,000,000?

<p>Php 1,000,000 (D)</p> Signup and view all the answers

If JFC Corporation has 300,500 shares of common stock and the total dividend is Php 50,000,000, what is the dividend per share of common stock?

<p>Php 166.50 (C)</p> Signup and view all the answers

What is the current yield on stock if JFC Corporation paid a dividend of Php 150.00 per share and the current price is Php 2,500.00 per share?

<p>6.00% (C)</p> Signup and view all the answers

If Julieto received a dividend of Php 85.00 per share and the price per share is Php 1,050, what is the current yield on his stock?

<p>6.50% (D)</p> Signup and view all the answers

What is Hannah's current yield on her stock if she received a dividend of Php 65.00 per share and the stock price is Php 2,150?

<p>2.98% (B)</p> Signup and view all the answers

If a company declared a total dividend of Php 20,000,000 and has 90,000 shares of common stock, what is the dividend per share for common stock?

<p>Php 200.00 (A)</p> Signup and view all the answers

In a scenario where a company declares dividends of Php 50,000,000 with 500,000 total shares, how much would each share receive in dividends if it were all common stock?

<p>Php 100.00 (B)</p> Signup and view all the answers

What is the Price-earnings ratio formula used to evaluate stocks?

<p>Price per share divided by earnings per share (B)</p> Signup and view all the answers

Which company has a higher price-earnings ratio, JFC or CME?

<p>JFC, with a ratio of 32.47 (B)</p> Signup and view all the answers

When a corporation sells bonds, what type of investment is it undertaking?

<p>Debt financing (A)</p> Signup and view all the answers

What is the yield equation used to calculate bond yield?

<p>Yield = P (1 + i)^m (C)</p> Signup and view all the answers

If a corporation declared dividends of Php 250,000,000 for 500,000 shares, what is the dividend per share?

<p>Php 500.00 (C)</p> Signup and view all the answers

Which type of bond is issued specifically to fund local projects?

<p>Municipal Bonds (C)</p> Signup and view all the answers

What is the total amount paid to bondholders at maturity when selling 10,000 bonds at 1,000 pesos each with 4% annual interest?

<p>Php 10,400,000 (C)</p> Signup and view all the answers

What is the current yield on stock if JFC Corporation paid a dividend of Php 250.00 per share and the current price is Php 5,000.00?

<p>5% (C)</p> Signup and view all the answers

Flashcards

Stocks (shares)

Represent ownership in a company, sold to individuals or companies.

Stockholder

A person or entity who owns shares of a company's stock.

Dividend

A portion of a company's profit, distributed to shareholders.

Par Value

The face value of a financial instrument, like a bond or stock, used to calculate it's worth over time.

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Broker

A person or firm facilitating transactions between buyers and sellers of stocks or bonds.

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Small-cap Stock

Stocks of smaller companies with lower market capitalization.

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Income Stock

Stocks that pay high dividends to investors.

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Blue-chip Stock

Stocks of well-established companies with stable earnings, considered less risky.

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Dividend per share (common stock)

The amount of dividend distributed to each common shareholder.

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Calculating Total Dividend

Determining the total dividend amount payable to all shareholders (common and preferred).

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Calculating Dividend per Share

Finding out how much each shareholder will receive.

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Current Yield of a Stock

Expresses the dividend's percentage value relative to the stock's price.

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Preferred Stock Dividend

The dividend given to shareholders holding preferred stock, often a fixed amount per share.

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Common Stock

Represents ownership of a company, giving voting rights.

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Share Price

The market value of a single share of stock.

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Stock Dividend

A distribution of company shares instead of cash to shareholders.

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Price-Earnings Ratio

The price of a stock, divided by its earnings per share.

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Bond

A written promise to repay a loan (the "par" or "face" value) with interest, on a specific date.

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Dividend per Share

The total dividend amount distributed to shareholders, divided by the number of outstanding shares.

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Government Bond

A bond issued by a national government, considered to be less risky than other types of bonds.

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Municipal Bond

A bond issued by a local government to finance local projects.

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Corporate Bond

A bond issued by a corporation to raise money for various purposes.

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Par/Face Value

The amount a bond is bought for, and is repaid at maturity.

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Study Notes

Stocks

  • Stocks represent ownership shares in a company
  • Stocks are also known as shares
  • A stock certificate serves as proof of ownership
  • The owner of the stocks is called a stockholder
  • Stocks are a type of security
  • The interest rate paid periodically on a bond is called a coupon
  • The amount a bond is bought for is called the par or face value

Bonds

  • A bond is a written promise to pay a sum of money plus interest by a specific date
  • The par or face value is the amount the bond is bought for
  • In case of bankruptcy, bondholders have first claim on assets over stockholders
  • The formula for yield is Yield = P (1+i)m

Types of Securities

  • Government Bonds: Issued by the national government, the principal amount and interest is repaid at maturity.
  • Municipal Bonds: Issued by local government, used to fund local projects.
  • Corporate Bonds: Issued by corporations, riskier than government bonds.
  • Mortgage Bonds: Collateralized by specific assets.

Dividends

  • Dividends are a company's profits distributed to shareholders.
  • Dividend in arrears are unpaid dividends from prior periods.
  • Dividend per share is the amount of dividend per stock.

Stock Types Based on Market Capitalization

  • Small-cap Stock: Stocks in smaller companies that have a low market value.
  • Mid-cap Stock: Stocks in companies with moderate market value.
  • Large-cap Stock: Stocks in larger companies that have a large market value.

Stock Types Based on Dividend Payments

  • Income Stock: Stocks that offer higher returns to investors due to dividends.
  • Growth Stock: Stocks that offer low or no dividends to reinvest their earnings.

Stock Types Based on Risk

  • Blue-chip Stock: Stocks of well-established companies with stable earnings, considered safer.
  • Beta Stock: Measures risk associated with stocks. The higher the beta, the higher the risk.
  • Cyclical Stock: Stocks that rely on economic trends and change with the overall economic outlook.
  • Defensive Stock: Stocks of companies not heavily affected by the economy.

Stock Types Based on Ownership

  • Preferred Stock: Investors have priority over common stockholders with receiving dividends and assets.
  • Common Stock: Investors have voting rights and share directly in the company.

Computing Dividends

  • To calculate dividends per share, divide total dividends by the number of shares.

Computing Current Yield

  • To calculate current yield, divide annual dividend per share by the price per share.

Price-Earnings Ratio

  • To calculate the price-earnings ratio of a stock, divide the price per share by the earnings per share.

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