Bonds and Stocks PDF

Stocks Stocks are called shares that a company sold to an individual or company. Stocks certificate serve as proof of ownership indicating the number of shares of stocks he/she owns. The buyer of the stocks is called stockholder. Dividend- a company’s profit that is distributed to the shareholders...

Stocks Stocks are called shares that a company sold to an individual or company. Stocks certificate serve as proof of ownership indicating the number of shares of stocks he/she owns. The buyer of the stocks is called stockholder. Dividend- a company’s profit that is distributed to the shareholders Coupon-the interest rate paid periodically Par Value and Denomination- a bond's face value , is the price assigned by the issuer acting as the principal amount in determining its value over time. Broker- a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. Stocks or bonds may be sold to the highest bidder. Stocks or bonds bought at face or par value and later sold at premium is bought at a higher price than the par value. If it is bought at lower value it is called discount. In the transaction, the Broker also earns thru commission on the trading. Terms 1.Dividend – a company’s profit that is distributed to the shareholders 2.Shareholders – a person who owns a share of stocks. 3.Par value – a financial figure specified in the corporate charter printed in the stock certificate. 4.Dividend in arrears – Unpaid dividends at the end of the period, rather it accumulates from period to period. 5.Dividend per share – the amount of dividends the shareholder received on per share-basis. Types of Stocks based on Market Capitalization a. Small-cap Stock – usually in small companies since it has a smallest value in the market. b. Mid-cap Stock – companies with a moderate market, making them smaller than large-cap stock but larger than small-cap stocks. c. Large-cap Stock – usually in large companies since it has a largest value in the Types of Stocks based on Dividend Payments a. Income Stock – also known as dividend-yield or dog stock. It gives higher dividend to the investors b. Growth Stock – did not offer a high dividend in order to reinvest their money Types of Stocks based on Risk a. Blue-chip Stock – stocks which is considered as stable since well-established company with stable earnings. b. Beta Stock – this measures the risk. The higher the beta, the riskier it is. Types of Stocks based on Price trends a. Cyclical Stock – this kind of stock relies on economic trends b. Defensive Stock – issued by the company that is not affected by the economy Types of Stocks based on Ownership a. Preferred Stock – the investor has the first rights over the common shareholders to the dividends and assets. b. Common Stock – the investor has the voting rights and shares straightly in the business Computing for Dividends 1. A corporation sold 300,000 shares of common stock to stockholders. The company declared a dividend of Php 30,000,000 at the end of the year. How much dividends per share of common stock? Number of shares (common) = 300,000 Total Dividend = Php 30,000,000 NO. OF SHARES(COMMON/PREFERRED) DIVIDEND PER SHARES(COMMON/PREFERRED) TOTAL DIVIDEND TOTAL DIVIDEND= NO. OF SHARE /DIVIDEND(COMMON/PREFERRED) X DIVIDEND PER SHARE NO. OF SHARE= TOTAL DIVIDEND/DIVIDEND PER SHARE DIVIDEND PER SHARE= TOTAL DIVIDEND/ NO. OF SHARES NOTE: COMMON BY COMMON PREFERRED BY PREFERRED 2. The board of director declared a dividend of Php 20,000,000. The company has 50,000 shares of preferred stock that pays Php 50.00 per share and 90,000 shares of common stock. Find the total dividends due to the shareholders for preferred stocks and dividend per share of common stock. Number of shares (preferred)=50,000 Dividend per share (preferred) = Php50.00 Number of shares (common) = 90,000 Total dividend = Php 20,000,000 TOTAL DIVIDEND= NO. OF SHARE X DIVIDEND PER SHARE NO. OF SHARE= TOTAL DIVIDEND/DIVIDEND PER SHARE DIVIDEND PER SHARE= TOTAL DIVIDEND/ NO. OF SHARES NOTE: COMMON BY COMMON PREFERRED BY PREFERRED 3. Suppose JFC Corporation has 300,500 shares of common stock in JCC Corporation. JCC had 500,000 shares to stockholders. The dividend of Php 50,000,000 was proclaimed by the board of directors last year. What is the amount of the common dividend per share and what is the total common dividend JFC will receive? Total dividend = Php 50,000,000 Number of shares (common) = 300,500 TOTAL DIVIDEND= NO. OF SHARE X DIVIDEND PER SHARE NO. OF SHARE= TOTAL DIVIDEND/DIVIDEND PER SHARE DIVIDEND PER SHARE= TOTAL DIVIDEND/ NO. OF SHARES NOTE: COMMON BY COMMON PREFERRED BY PREFERRED Computing the Current Yield of 1. Stock If JFC Corporation paid a dvividend of Php 150.00 per share last year. The current price is Php 2,500.00 per share; calculate the current yield on stock. 2. Julieto is planning to sell his shares in the certain company. The dividend he received was Php 85.00 per share and the price of the stock per share is Php 1,050. Solve for the current yield on stock. 3. Hannah is planning to sell his shares in the certain company. The dividend he received was Php 65.00 per share and the price of the stock per share is Php 2,150. Solve for the current yield on stock. Computing the Price-earnings Ratio of the stock 1.JJ is planning to invest in stocks. He checked two companies and thought which company provides better earning. He computes for the price-earnings ratio. a)JFC, price share Php 2,500, annual dividend per share Php 77; and b)CME, price share Php 1,800, annual dividend per share Php 65 Computing the Price-earnings Ratio of the stock 2. James is planning to invest in stocks. He checked two companies and thought which company provides better earning. He computes for the price-earnings ratio. a)FAC, price share Php 3,500, annual dividend per share Php 67; and b)CEM, price share Php 1,900, annual dividend per share Php 45  Bonds Bond is a written promise to pay a sum of money together with the interest on the specified date. The amount which the bond is bought is called par or face value. In case of bankruptcy, the bondholder has the first claim on the assets over the stockholder. Yield = P (1+ i)m Types of Bonds a. Government Bonds– bond issued by the national government. The principal amount of this bond is returned in full plus the interest when it reaches maturity. b. Municipal Stock – bonds issued by local government that fund local projects. c. Corporate Stock – bonds issued by companies to raise money for various reasons. It is more risky than government stock. d. Mortgage Bonds– locked in the pledge of particular assets. 1.A certain corporation would like to expand its business by raising money through selling 10,000 bonds for 1,000 pesos each bank it promised to pay it after 5 years with annual interest rate of 4% compounded yearly 2. A company would like to expand its business by raising money by selling bonds of 1,200 pesos each bond he promised to pay it after 8 years with annual interest of 2% compounded yearly. ACTIVITY NO. 4 1. A corporation sold 500,000 shares of common stock to stockholders. The company declared a dividend of Php 250,000,000 at the end of the year. How much dividends per share of common stock? 2. If JFC Corporation paid a dividend of Php 250.00 per share last year. The current price is Php 5,000.00 per share; calculate the current yield on stock. 3. A company would like to expand its business by raising money by selling bonds of 1,500 pesos each bond he promised to pay it after 6 years with annual interest of 5% compounded yearly.