100% found this document useful (1 vote)
809 views34 pages

General Mathematics Quarter 2-Module 1: Week 1 - Week 5: Department of Education - Republic of The Philippines

Uploaded by

Elaiza Gayta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
100% found this document useful (1 vote)
809 views34 pages

General Mathematics Quarter 2-Module 1: Week 1 - Week 5: Department of Education - Republic of The Philippines

Uploaded by

Elaiza Gayta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 34

11

General Mathematics
11
Quarter 2- Module 1:
1
Week 1- Week 5

Department of Education • Republic of the Philippines


Math – Grade 11
Alternative Delivery Mode
Quarter 1 – Module 1 : Function
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 book 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:
Undersecretary:
Assistant Secretary:

Development Team of the Module

Content Editor: Buenaventura Mata


Language Editor : Lilia L. Longos
Reviewer : Gina L. Aguitez
Illustrator and Lay-out Artist : Celeste P. Teruñez
Management Team :

Printed in the Philippines by

Department of Education – Division of Las Pinas

Office Address: 309 Diego Cera, Pulan lupa 1


Las Pinas, Metro Manila 1742
Telefax: (02) 8 822-3840
E-mail Address:

2
Q2 Week 1 Simple
Day 1-4
and Compound
Interests

What I Need to Know

CONTENT STANDARDS: The learners demonstrate an understanding of


key concepts of key concepts of simple and compound interests.

PERFORMANCE STANDARDS: The learners is able to investigate, analyze


and solve problems involving simple and compound

After going through this module, you are expected to:


1. illustrates simple and compound interests. M11GM-IIa-1
2. distinguishes between simple and compound interests. M11GM-IIa-2

What’s In

• Interest (I) amount paid or earned for the use of money.


• Rate (r) - annual rate, usually in percent, charged by the lender, or rate of
increase of the investment.
• Principal (P) - amount of money borrowed or invested o the origin date
• Time or term (t) - amount of time in years the money is borrowed or invested;
length of time between the origin and maturity dates.
• Amount - The sum of both principal and their interest.
• Maturity value or future value (F) - amount after t years; the lender receives
from the borrower on the maturity date
• Borrower or debtor - person (or institution) who owes the money or avails of
the funds from the lender
• Simple interest (Is) - interest that is computed on the principal land then added
to it the amount of interest paid for each period remains the same.

3
• Compound Interest (Ic) - interest is computed on the principal and also on the
accumulated past interests. This means that the amount of interest to be paid
increases every period.
• Simple Interest Formula: I = Prt
Where I – Interest P – Principal r – rate t – time
• Compound interest formula 𝐀 = 𝐏(𝟏 + 𝐫)𝐭
Where r – Interest rate P – Initial Principal Balance A – Final amount
t – number of time period elapsed n – number of times interest
applied per time period
Simple Interest
Discussing simple interest is one among the most important and basic ideas
for mastering your finances. This could be the starting investment, or the
starting quantity of a loan. Interest, in its simplest form, is calculated as a
percent of the principal.

Simple Interest Formula:


The formula for calculating simple interest is:
Simple Interest = (P)(i)(n)
whereas P is the principle, i is the interest rate, and n is the term of loan.
For example, if you borrowed $250 from a close friend and agreed to
repay it with 6% interest, then the total amount of interest you would pay
would just be the 6% of 250:
= $250 (6%)
= $250 (0.06)
= $15
Then the total amount that you would repay would be $265, the original
amount plus the interest.
Example Problems:
1. A 3-year loan of $500 is made with 6% simple interest. Find the
interest earned.
Step 1: Identify the values given in the problem
Term of the loan is 3 years: n=3
Initial amount of $500: P=$500
Interest rate is 6%: i=0.06
Step 2: Apply the formula
4
SI = P x i x n
SI = ($500)(0.06)(3)
SI = $90
Answer: The interest earned is $90
2. A total of $1,500 is invested at a simple interest at a simple interest
rate of 5% for 3 months. How much interest is earned on this investment?
Step 1: Identify the values given in the problem
Initial amount is $1,500: P=$1,500
Interest rate is 5%: i=(0.05)
Term of the loan is 3 months: n=1/4
Before we can apply the formula, we need to write the time of 3 months
in terms of years. Since there are 12 months in a year:
N=3/12
N=1/4
Step 2: Apply the formula
SI = P x i x n
SI = ($1,500)(0.05)(1/4)
SI = 75/4 or $18.75
Answer: The interest earned is $18.75
Simple Interest: Mrs. Nancy invests ₱ 40,000 in her savings account.
She earns an interest of 2% (or ₱ 800.00) every month.After a year, she
earns ₱ 9,600. Notice that Mrs. Nancy investment gives her earnings of ₱
9,600 in one year or 12 months. Her earnings per month is ₱ 800.00. The
amount of interest paid for each period by the bank remains the same.
When the interest paid each period remains the same, this is a simple
interest.
Compound Interest
Is the interest calculated on the initial principal, that includes all of the
accumulated interest of previous periods of a deposit or loan. It is the result of
reinvesting interest, rather than paying it out.
Compound Interest Formula:

The formula for calculating compound interest is:


Compound Interest = P [(1+i)n-1]

5
Whereas P is the principal, I is the nominal annual interest rate in percentage terms,
and n = number of compounding periods.

Example Problem:
1. Peter takes a three-year loan of $12,000 at an interest rate of 4% that
compounds annually. What would be the amount of interest?
Step 1: Identify the values given in the problem.
Number of compounding periods is 3 years: n=3
Initial amount is $12,000: P=$12,000

Interest rate is 4%: i=0.04


Step 2: Apply the formula
CI= P [ (1+i)n -1]

CI= $12,000 [ (1+0.04)3 -1]


CI= $1,498.368
Answer: The total amount of interest would be $1,498.368

Compounding Periods
The higher number of compounding periods, the greater the amount of
compounding interest.

Compound Interest: Mr. Conrad invests ₱100,000 in a stock portfolio


that earns 12% interest monthly. Interest that is not withdrawn is
considered as an additional investment. For the first three months, he earns
₱12,000, ₱13,400 and ₱ 13, 612.00 in interest, respectively, for a total of ₱
39,012.8. What did you notice about the interest earned by Mr. Conrad?
Since Mr. Conrad did not withdraw his monthly interest, his investment
increases every period and his earned interest accumulates from ₱12,000 for
the first month, ₱13,400 for the second month and ₱13, 612 for the third
month. This gives him an earned interest of ₱ 39,012.8. In compound
interest, the amount of interest to be paid increases every period. interest is
computed on the principal and also on the accumulated past interests.

Automobile loans or short-term personal loans are the ones that


usually applies simple interest.

Simple Interest Compound Interest

Return for Provides low returns Provides similarly high returns for
lender for the money lender the money lender

6
Principal The principal is The principal keeps on changing
constant due to addition of accrued interest
in the entire period

Growth Initial Value and the The Interest and the initial amount
Interest growth remain growth is rapid and increases at a
constant. fast pace

Interest Charge Interest is charge on interest is charge on the principal


the principal amount and the interest amount
only

How do we find the principal amount when the rate, time and simple interest is given ?
Example 1: What amount of principal will earn an interest of 2,625 at 3% in 5 years?
𝐼 𝟐,𝟔𝟐𝟓 𝟐𝟔𝟐𝟓
Using the formula 𝑃= we have 𝑷= = = ₱𝟏𝟕, 𝟓𝟎𝟎
𝑟𝑡 𝟎.𝟎𝟑(𝟓) 𝟎.𝟏𝟓
17, 5OO is the initial investment you need to earn an interest of 2,625 at 3% in 5 years
Example 2: What annual interest rate is needed for your initial investment amounting
𝑰
to 50,000 to earn 3,125 in 15 months? Using the formula 𝒓= we have
𝑷𝒕
𝟑,𝟏𝟐𝟓 𝟑,𝟏𝟐𝟓 𝟑,𝟏𝟐𝟓
𝐫= 𝟏𝟓 = = = 𝟎. 𝟎𝟓 𝐨𝐫 𝟓%
𝟓𝟎,𝟎𝟎𝟎(𝟏𝟐) 𝟓𝟎,𝟎𝟎𝟎(𝟏.𝟐𝟓) 𝟔𝟐,𝟓𝟗𝟗

Example 3: In what time will 15,000 amounts to 24,450 if the simple interest is calculated at 7% per
annum?
𝐼 9,450 9,450
Using the formula 𝑡= we have 𝑡= = 1,050 = 9 𝑦𝑒𝑎𝑟𝑠
𝑃𝑟 15,000(0.07)

Example 4: What is the simple interest if you invest an amount of 12,500 at an interest rate
of 7.5% for 3 years. Using the formula, I = Prt we have I = 12,500 (0.075) (3) =₱ 2,812.5

7
Assessment

Directions: Choose the letter of the corrct answer.

1. It is interest applied only to the principal amount.


A. Simple interest B. Compound interest C. Rate D. Time
2. The interest is being applied both to the accumulated interest and the principal amount.
A. Rate B. Compound interest C. Maturity D. Time
3. Rates with 5% compounded daily in 1 year will yield a smaller amount compare to rate with
514% compounded annually. What type of interest is used in the given question?
A. Simple Interest B. Interest Rate C. Compounded Interest D. Annuity

4. Mrs. Makabuhay invest ₱20,000 in her savings account. He earns an interest of 10% (or
₱2,000) every month. After five months, she earned ₱10,000 in interest. This is an example of
A. Simple Interest B. Interest Rate C. Compounded D.
Annuity
5. In simple interest formula which is I = Prt, P represents the principal amount. The principal is
A. The amount of money borrowed or deposited
B. The amount in your cooperative bank you buy as a customer
C. The amount taxed by the government
D. The amount you earned as an investor

6. Ces went to Yashano Mall and saw a massage chair that she could have to take a loan at
Manila Teachers for P6500 to purchase. Manila Teachers said that she could get a simple
interest rate of 8% for 10 years. This illustrates
A. Simple interest B. Compounded interest C. Annuities D. Interest
7. Suppose Myra borrows 500,000 for three years from her best friend, who agrees to charge
Myra an interest at 5% annually. Assume that the principal amount remains the same
throughout three years. What interest is reflected in the given scenario?
A. Simple interest B. Compounded interest C. Principal D. Rate

8. The two basically types of interest are


A. Discounts and Interest
B. Simple and continuous
C. Simple and Compound
D. Simple and Compounding
9. In compound interest, interest earns
A. Interest B. Percent C. Investment D.Money
10. Simple interest is depending on rate or interest, time period and
A. Principle B. Principal C. Principles D.Prinsiple

11. Gabriel deposited Php ₱5,000 at a bank with an annual simple interest rate of 3%. What is the
interest she will earn in 3 years?
A. ₱450 B. ₱45,000 C. ₱4,500 D. ₱45
12. How much interest is earned on a principal of ₱1,800.62 invested at an interest rate of 8% for
four years?
A. ₱57, 619.84 B. ₱5,619.84 C. ₱576.20 D. ₱1,944.67
13. Dennis borrow 50,220 from his brother for two years at an interest rate of 6%, how much
interest will he pay?
A. ₱6,026,4 B. ₱60,264 C. ₱602, 640 D. ₱602.64
14. Interest that is credited daily, monthly, quarterly, semi-annually, or annually on both principal
and previously credited interest.
A. Simple B. Compound C. General D. Final Amount

8
Q2
Week 2
Simple and Compound Interest in
Days 1-4
Depth

15. This is a thing that is borrowed, especially money, that is expected to be paid back with interest.
A. Debt B. Credit C. Debit D. Interest

What I Need to Know

CONTENT STANDARDS: The learners demonstrate an understanding of


simple and compound interest

PERFORMANCE STANDARDS: The learners shall be able investigate ,


analyze and solved problems involving simple and compund interest using
appropriate business financial instrument.

After going through this module, you are expected to:


1. computes interest, maturity value, future value, and present value in
simple interest and compound interest environment. M11GM-IIa-b-1
2. solves problems involving simple and compound interests. M11GM-IIb-
2

What I Know :
Lets TRY

Directions: Chose the letter of the correct answer. Write the letter on the separate
sheet of paper
1. What will be the value after 4 years if the present value of your investment is 1,500 with
an interest rate of 5% compounded annually?
A. 1823.26 B. 1,500 C. 323. 26 D. 7,593.75
2. You wanted to have 150,000 after 20 years. The rate of interest is 7.5% compounded
annually, how much will be your initial investment?
A. 311.97 B. 35, 311. 97 C. 150,000 D.
225,000
3. You wanted to have 30,000 after 2 years. The rate of interest is 11.5% compounded
annually, how much will be your initial investment?
A. 24, 130.79 B. 6,900 C. 13,452.00 D.
36,900
For problem number 4 and 5
9
Mrs Merlita borrowed an amount of 200,000 with an interest rate of 3% compounded
annually for 5 years.
4. How much will she pay at the end of the term?
A. 231, 854. 81 B. 31, 854.81 C. 1,854.81 D.
854.81
5. What was the total interest gain after 5 years?
A. 854.81 B. 31, 854.81 C. 431,854.81 D.
285.81

What’s In

Ces invested 50,000 in a coffee shop at an interest rate of 12% compounded monthly.
How much will she receive at the end of one year?
Step 1: Identify the given data
r = 0.12 (in decimal form of 12%)
n = 12
effective annual rate =
Step 2: Identify what is asked
How much will she receive at the end of one year.
Step 3: Solve
𝑟 𝑛 0.12 12
Effective annual rate = (1 + 𝑛) − 1 = (1 + 12 ) − 1 = (1.01)12 − 1 =
0.1268 𝑜𝑟 12.68%
At the end of one-year Ces will have 50,000(1.1268) = 56, 341. 21
Example 2:
Gabriel deposited an amount of 100,000 at an interest rate of 5.5% compounded
semi-annually.
How much interest was added in the first year of what she deposited?
Step 1: Identify the given data
r = 0.055 (which is 5.5% as a decimal)
Step 2: Identify what is asked
How much interest was added in the first year of what she deposited?
Step 3: Solve
𝑟 𝑛 0.055 2
Effective Annual Rate = (1 + ) − 1 = (1 + ) − 1 = (1.0275)2 − 1 =
𝑛 2
1.05575625 − 1 = 0.5575625
The amount of interest will be 105575.625
Example 3: How much do you need to borrow now to get 15,000 in 15 years at 5% interest
rate?
Step 1: Identify the given data
FV = 15,000 r = 5% n = 15
Step 2: what is asked: PV
15,000 15,000
Step 3: Solve 𝑃𝑉 = (1+0.05)15 = 1.0515 = 7,215.26

What’s New

WHAT’S NEW
Example1: If you invested an amount of 35,000 at 5.8% interest compounded
monthly for 6 years, how much would you have after 6 years?
Use graphic organizer.
10
Step 1: Identify the given

P= 35,000 r = 5.8% or 0.058 (in decimal) t = 6 years n = 12 since compounded monthly


Step 2: What is asked: What is your allowance worth after 4 years (Future Value)?

𝑟 𝑛𝑡
Step 3: Formula FV = P(1 + )
𝑛

0.058 12(4)
Step 4: Solution FV = 35,000 (1 + ) = 35,000(1 + 0.005)48 = 35,000(1.2704891611) = 44,467.12
12

Step 5: Conclusion Therefore, your money will 44,467.12 after 6 years

Example2: Gabriel invest 7,500 at 5.4% compounded continuously for 10 years. How
much will Gabriel have in her account after 10 years?

Step 1: Identify the given P= 7,500 r = 5.4% or 0.054 (in decimal) t = 10 years

Step 2: What is asked: How much will Gabriel have in her account after 10 years?

Step 3: Formula A = P𝑒 𝑟𝑡

Step 4: Solution A= 7,500(𝑒)0.054(10) = 7,500(1.71600686218) = 12870.0514664

Step 5: Conclusion Therefore, Gabriel’s money will be 12, 870.05 after 10 years

• Simple Interest Formula: I = Prt


Where I – Interest P – Principal r – rate t – time
• Compound interest formula 𝐀 = 𝐏(𝟏 + 𝐫)𝐭
Where r – Interest rate P – Initial Principal Balance A – Final amount
t – number of time period elapsed n – number of times interest applied per time period
• Continuous Compounding Formula A=Pert
Where A – Final Amount P – Initial Amount r – interest rate t-
time
Compounded Number of Times per Year

Annually 1

Semi-annually 2

Quarterly 4

Monthly 12

Weekly 52

Daily 365

Example1:
How much time will it take for an amount of 7,000 to yield 1,925 as interest at 5.5%
per annum of simple interest?
Step 1: Identify the given

P= 7,000 r = 5.5 % or 0.055 (in decimal) I = 1,115

11
Step 2: What is asked: time

𝐼
Step 3: Formula 𝑡 = 𝑃𝑟

1,925 1,925
Step 4: Solution 𝑡 = (7,000)(0.055) = =5
385

Step 5: Conclusion After 5 years your 7,000 will yield 1,1925

Example2:
Liza invest 11,500 at 4% compounded continuously for 5 years. How much will Liza have in her
account after 5 years?

Step 1: Identify the given P= 11,500 r = 4% or 0.04 (in decimal) t = 5 years

Step 2: What is asked: How much will Liza have in her account after 5years?

Step 3: Formula A = P𝑒 𝑟𝑡

Step 4: Solution A= 11,500(𝑒)0.04(5) = 11,500(1.0202013) = 11, 732. 32

Step 5: Conclusion Therefore, Liza’s money will be 11, 732.32 after 5 years

What is It

Choose the appropriate formula to fill-in the blank,

𝑭𝑽 𝑟 𝑛𝑡
SI= Prt 𝐏𝐕 = (𝟏+𝒓)𝒏 𝑭𝑽 = 𝑷𝑽(𝟏 + 𝒓)𝒏 FV = P(1 + 𝑛) A = P𝑒 𝑟𝑡

________1. Continuous compounding


________ 2. Simple Interest
________ 3. Principal Value
________ 4. Compound Interest
________ 5. Compound interest more than once a year

What’s More
Compounding More than Once a Year
Definition of Terms
• Conversion or Interest Period - time between successive conversions of interest
12
• Frequency of Conversion (m) - number of conversion periods in one year
• Nominal Rate (i(m)) - annual rate of interest
• Rate (j) of Interest for each Conversion Period
𝑖 (𝑚) 𝑎𝑛𝑛𝑢𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑗= =
𝑚 𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛
• Total Number of Conversion periods n
n = tm = (frequency of conversion) × (time in years)
Note on rate notation: r, i(m), j
In earlier lessons, r was used to denote the interest rate. Now that an interest rate
can refer to two rates (either nominal or rate per conversion period), the symbols i(m)
and j will be used instead.
Example 1:
Given a principal of P8,000. Earn an annual interest rate of 4% in two portions 1%
after 6 months, and 1% after another 6 month, What would be the value after 3
years?
Given:
Principal Value = PhP 80,000
Annual Interest Rate =4%, compounded semi-annually
Conversion:
(We can find the Rate (j) using its formula)
𝑖 (𝑚) 𝑎𝑛𝑛𝑢𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑗= =
𝑚 𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛
4
𝑗= =2
2
Formula:
𝐹𝑉 = 𝑃𝑉(1 + 𝑗)
Solution Table:
Time (n) in years Solution and Amount
1/2 8,000 x 1.02 =8160
1 1/2 8160 x 1.02 =8323.5
2 8323.5 x 1.02 =8489.67
2 1/2 8489.67 x 1.02 =8659.46
3 8659.46x 1.02 =8832.65

13
Maturity Value, Compounding m times a Year
𝐹𝑉 = 𝑃𝑉(1 + 𝑗)𝑚𝑛
where FV = Maturity/Future Value
PV = Principal Value
j = Rate of Interest
m= Frequency of Conversion
n = term or time in years

Example 2:
Find the maturity value an interest if P5,000 is deposited in a bank at 2%
compounded monthly for 3 years.
Given:
PV= P5,000
i(12)=0.02
n=3 years
m=12 (12 months per year)
Solution:
Compute for the interest Rate in a conversion period by
𝑖 (12) 0.02
𝑗= =
12 12
Compute for the total number of conversion period by
𝑚𝑛 = (12)(3) = 36 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠
Compute for the maturity value using
𝐹𝑉 = 𝑃𝑉(1 + 𝑗)𝑚𝑛
0.02 36
𝐹𝑉 = 5000 (1 + )
12
𝑭𝑽 = 𝑷𝒉𝒑 𝟓𝟑𝟎𝟖. 𝟗𝟕
The compound interest is given by
Ic = FV – PV = P5308.97 - P5000 = Php 5308.97

Present Value P at Compounding Interest


𝐹𝑉
𝑃𝑉 =
(1 + 𝑗)𝑚𝑛
where FV = Maturity/Future Value
14
PV = Principal Value
j = Rate of Interest
m= Frequency of Conversion
n = term or time in years
Example 3:
Find the Present value of P10,000 due in 4 years if money is invested at 12%
compounded semi-annually

Given:
FV= P10,000 i(2)=0.12 n=4
Solution:
Compute for the interest Rate in a conversion period by
𝑖 (2) 0.12
𝑗= = = 0.06
𝑚 2
Compute for the total number of conversion period by
𝑚𝑛 = (4)(2) = 8 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠
Compute for the maturity value using
𝐹𝑉
𝑃𝑉 =
(1 + 𝑗)𝑚𝑛
10,000
𝑃𝑉 =
(1 + 0.06)8
𝑷𝑽 = 𝑷𝒉𝒑 𝟔𝟐𝟕𝟒. 𝟏𝟐

Finding Interest Rate and Time In Compound Interest


Maturity Value Formula
Rather than compute compounding interest manually, you can use a formula.
The maturity value formula is
V = P (1 + r)n
As you can see V, P, r and n are variables in the formula. V is the maturity
value, P is the original principal amount, and n is the number of compounding intervals
from the time of issue to maturity date. The variable r represents that periodic interest
rate.
Equivalent rates
two annual rates with different conversion periods that will earn the same
compound amount at
the end of a given number of years
15
Nominal rate
annual interest rate (may be compounded more than once a year)
Effective rate
the rate compounded annually that will give the same compound amount as a
given nominal rate;
denoted by i(1)
Finding Time in Compound Interest

Example 1:. How long will it take P2,000 to accumulate to P4,000 in a bank savings
account at 8% compounded quarterly?

Given:
P= P2,000
V= P4,000
m= 4

i(m)= i(4) = 8% = 0.08


𝐢(𝒎) 0.08
r= = = 0.02
𝐦 4

Substitute the given to the formula, V = P (1 + r)n, then solve for n by taking logarithm
of both sides.
4,000= 2,000(1 +0.2)n log(2)= log(1.2)n
4,000
=(1.2) n log(2)= nlog(1.2)
2,000

2=(1.2)n n= 3.80 periods


n 3.80
Thus, payments should be made for 3.80 months, or t= m = 4
= 0.95 years.

Finding Interest Rate in Compound Interest


Example 2: At what interest rate compounded semi-annually will money triple itself in
15 years?
Given:
V= 3P
t= 15 years
m= 2
n= mt =(2)(15)=30
Substitute the given to the formula, V = P (1 + r)n, then find r(2).
3P = P(1+r)30
𝟏
𝟑𝟑𝟎 = (1+r)
𝟏
𝟑𝟑𝟎 -1 = r
r = 0.0373 or 3.73%

16
The Interest rate in each conversion period is 3.37%
The nominal rate can be computed by
𝐢(𝒎)
r= 𝐦
𝐢(𝟐)
0.0373 = 𝟐
(2)
i = (0.0373)(2) = 0.0746 or 7.46%
Therefore, the nominal rate that will triple an amount of money semi-annually in 15
years is 7.46%
ASSESSMENTS ( EXTRA MILE )
I. Do what is asked:
1. Zoe invested 50% of his heir at 27.5% interest compounded continuously. If after 2
years he received an amount of 866,626.51, what was the initial investment?
2. You invested 35,000 at 13.5% compounded annually for 3 years. What is your 35,000
worth after 3 years?
3. If Perez invested 115,000 at 6.5% per year compounded quarterly, what was the total
amount after 4 years?
4. Nancy received the maturity value of her earnings amounting to 45,000 after giving her
initial savings of 27,900, how much is the earned interest?
II. Directions: Chose the letter of the correct answer. Write the letter on the separate sheet
of paper
1. Starting money = 15,900; interest rate = 5.5%, time = 5 years, how much interest do you pay?
A. 4,372,5 B. 16,774.50 C. 874.50 D. 11,527.50
2. You invested 150,000 at 2.5% compounded continuously for 10 years. What is your 150,000
worth after 10 years?
A. 37, 500 B. 212, 860.13 C. 112, 500 D. 149,500
3. You borrow 14,500 to your cousin which charges you 5% compounded semi annually for 3
years. What total amount will you pay after 3 years?
A. 2,471.12 B. 2,175 C. 16, 971.12 D. 12, 325
4. Find the present value of 71,624.31 due in 3 years if money is invested at 9% compounded
semi-annually.
A. 16,623 B. 65,000 C. 37,900 D. 55,000
For question number 5 and 6
You deposited an amount of 25,000 for two years at 3% compounded semi-annually
5. What is the future value?
A. 26, 534.09 B. 1,500 C. 103,000 D. 25, 375
6. What is the compound interest?
A. 375 B. 78.000 C. 23, 500 D. 1,534.09
7. The maturity value of the amount Myra borrowed in 108 months at 7% compounded monthly
is 37, 483.54. Find the present value.
A. 20,000 B.17, 483.54 C, 23,614.63 D. 13, 868.91
8. Gabriel will receive an amount of 68, 783. 31 from her investment after 4 years at 8%
compounded monthly. Find his initial investment.
A. 22, 010.66 B. 50,000 C. 70, 495.39 D. none of
the choices
9. It is the sum of principal and interest and their value becomes the principal for the next period.
A. Annuity
B. Present value
C. Compound amount
D. Compound interest

17
Q2
Week 3 Simple and General Annuities
Days 1-4

What I Need to Know

CONTENT STANDARDS: The learners demonstrate an understanding of


key concepts of simple and general annuities.
PERFORMANCE STANDARDS: The learners shall be able investigate, analyze
and solve problems involving simple and compound interests and simple
and general annuities using appropriate business and financial instruments
After going through this module, you are expected to:
1. illustrates simple and general annuities. M11GM-IIc-1 29.
2. distinguishes between simple and general annuities. M11GM-IIc-2 30.
3. finds the future value and present value of both simple annuities and general
annuities. M11GM-IIc-d-1

What I Know

Directions: Read each item carefully. Write the letter of the correct answer on
your notebook.
1. It is a sequence of paymets made at equal (fixed intervals or period
of time.
A. Annuity B. Payment Interval C. Term of Annuity
D. Periodic Payment
2. It is the amount of each payment.
A. Payment Interval B. Present value C. Term of Annuity
D. Periodic Payment
3. Which of the following is an example of general annuity.
A. Your salary
B. Paying a car in cash
C. Installment Payment for an appliance at the end of each month
with interest compounded annually
D. Instalment payment for an appliance at the end of each month
with interest compounded monthly.
4. Which is an example of a simple annuity
18
A. House rental
B. A residential mortgage loan
C. A money borrowed by your parent without interest
D. None of the above
5. Which of the following is not an exaple of contingent annuity?
A. Life insurance C. Your monthly salary
B. Pension payment D. None of the above

What’s In

Definition of Terms:
Annuity - Annuity is a sequence or series of payments made at equal periods of time.
Periodic payments – Amount of each payment
Simple Annuity - Simple annuities are a type of annuity where the interest is compounded at
the same time as the annuity payment. (To be discussed in I.)
General Annuity - A general annuity is an annuity where the payments do not coincide with
the interest periods. (To be discussed in II.)
Deferred Annuity – A deferred annuity is an annuity which commences only after a lapse of
some specified time after the final purchase premium has been paid. (To be discussed in III.)
Ordinary Annuity - Also known as Annuity Immediate, this is a type of annuity where the
payment are made at the end of each period or payment interval.
Annuities
According to Simple annuity General annuity
payment -An annuity where the - An annuity where the payment interval
interval and payment interval is the same is not the same as the interest period
interest period as the interest period
According to Ordinary Annuity Annuity Due
the time of - (or annuity - a type of annuity in which the payments
payment immediate) are made at beginning of each payment
A type of annuity in which the interval
payments are made at the
end of each payment interval
According to Annuity Certain Contingent Annuity
duration - An annuity in which - an annuity in which the payments
payments begin and end at extends over an indefinite (or
definite times indeterminate) length of time

What’s New

I.) Simple Annuity

19
Objective(s): At the end of this lesson, the learner will be able to graph and illustrate simple
annuities, compute the future and present values of simple annuities, and compute the periodic
payment of simple annuities.
One of the annuities under simple annuity is ordinary annuity. The image below is an example
of a time diagram of an ordinary annuity:

Time Diagram of an
Ordinary Annuity

R R R R R … R

0 1 2 3 4 5 … n

Where: R is the periodic payments;


n in the number of payments
Future Value of an Ordinary Annuity

The image below is an example of a time diagram of the future value of an ordinary annuity:

(Image source: https://www.investopedia.com)


The future value (F) of an ordinary annuity is given by:

(𝟏 + 𝒋)𝒏 − 𝟏
𝐅= 𝐑
𝒋

Where: R is the periodical payment; i is the interest per annum

n is the number of payments; m is number of conversions per year

j is the interest rate per period; t is the term

𝒊
𝒋= 𝒏 = 𝒕𝒎
𝒎

20
Example: Suppose you invested $1000 per quarter over a 15 year period. If money earns an
annual rate of 6.5% compounded quarterly, how much would be available at the end of the
time period?
Given: Find:
R = $1000 n = tm

t = 15 years = (15)(4) = 60
𝑖
m=4 j=𝑚
0.065
i = 6.5% = 0.065 = = 0.01625
4

Solution:
(1 + 𝑗)𝑛 − 1
F= R
𝑗

(1 + 0.01625)60 − 1
F = 1000
0.01625
F = $100,336.68

Present Value of an Ordinary Annuity

The image below is an example of a time diagram of the present value of an ordinary annuity:

(Image source: https://www.investopedia.com)

The present value (P) of an ordinary annuity is given by:


𝟏 − (𝟏 + 𝒋)−𝒏
𝐏= 𝐑
𝒋

Where: R is the periodical payment; i is the interest per annum

21
n is the number of payments; m is number of conversions per year
j is the interest rate per period; t is the term
𝒊
𝒋= 𝒏 = 𝒕𝒎
𝒎
Example: How much money must you deposit now at 6% interest compounded quarterly in
order to be able to withdraw $3,000 at the end of each quarter year for two years?
Given: Find:
R = $3,000 n = tm
t = 2 years = (2)(4) = 8
𝑖
m=4 j=𝑚
0.06
i = 6% = 0.06 = = 0.015
4
Solution:
1 − (1 + 𝑗)−𝑛
P= R
𝑗
1 − (1 + 0.015)−8
P = 3,000
0.015
P = $22457.78

What’s More

Exercises:
A. Find the future value (F) of the ff. ordinary annuities.
1. Suppose on your 21st birthday you begin making monthly payments of $500 into an
account that pays 8% compounded monthly. If you continue the payments until your 51st
birthday (30 years), how much money will be in the account?
2. Calculate the future value of 12 monthly deposits of $1,000 if each payment is made on
the first day of the month and the interest rate per month is 1.1%?
B. Find the present value (P) of the ff. ordinary annuities.
1. Suppose your parents decide to give you $10,000 to be put in a college trust fund that
will be paid in equally quarterly installments over a 5 year period. If you deposit the
money into an account paying 1.5% per quarter, how much are the quarterly payments
(Assume the account will have a zero balance at the end of the period.)?
2. Suppose you have selected a new car to purchase for $19,500. If the car can be financed
over a period of 4 years at an annual rate of 6.9% compounded monthly, how much will
your monthly payments be?

22
What I Need to Know

CONTENT STANDARDS: The learners demonstrate an understanding of


key concepts of simple and general annuities.

PERFORMANCE STANDARDS:
Learning Outcome(s): investigate, analyze and solve problems involving simple and
general annuities using appropriate business and financial instruments.

Learning Competencies
1. finds the future value and present value of both simple annuities and general annuities.
M11GM-IIc-d-1
2. calculates the fair market value of a cash flow stream that includes an annuity. M11GM-
IId-2
3. calculates the present value and period of deferral of a deferred annuity. M11GM-IId-
3

What’s In

Cash Value or Cash Price


The cash value or cash price is equal to the down payment (if there is any)
plus the present value of the installment payments.
General Annuity – an annuity in which the payment interval is NOT the same as the
interest period.
Formula for Finding the Periodic Payment of a Simple Annuity (Annuity
Due/Ordinary Annuity)

Where: F = Future Value, P = Present Value, R = Periodic Payment, r = rate of


interest, m = interest period, t = time

Cash Flow
A cash flow is a term that refers to payments received (cash inflows) or payments or deposits
made (cash outflows). Cash inflows can be represented by positive numbers and cash
outflows can be represented by negative numbers.

Fair Market Value

23
A Fair Market Value or Economic Value of a cash flow (payment stream) on a particular
date refers to a single amount that is equivalent to the value of the payment stream at that
date. This particular date is called the focal date.

Ordinary Annuity: A series of consecutive payments or receipts of equal amount at


the end of each period for a specified number of periods

What is It

Calculating present value (discounting) is simply the inverse of calculating future value
(compounding):

How much would you be willing to pay today for the right to receive $1,000 five years
from now, given you wish to earn 6% on your investment ?

 1 
PV = $1000  5
 (1.06) 
= $1000(.747 )
= $747
Ordinary Annuity:
Example: Suppose you invest $100 at the end of each year for the next 3 years and earn 8%
per year on your investments. How much would you be worth at the end of the 3rd year?

24
FV3 = $100(1.08)2 + $100(1.08)1 +$100(1.08)0
= $100[(1.08)2 + (1.08)1 + (1.08)0]
= $100[Future value of an annuity of $1
factor for i = 8% and n = 3.]
= $100(3.246)
= $324.60
Future Value of an Annuity

Present Value of an Annuity


Suppose Gina can invest in a project that will return $100 at the end of each year for the next
3 years. How much should you be willing to invest today, given you wish to earn an 8%
annual rate of return on your investment?

Discounted back 1 year:


$100[1/(1.08)1] = $92.59
Discounted back 2 years:
$100[1/(1.08)2] = $85.73
Discounted back 3 years:
$100[1/(1.08)3] = $79.38
PV of the Annuity = $257.70

Solved Problems

Suppose you can invest in a project that will return $100 at the end of each year
for the next 3 years. How much should you be willing to invest today, given you
wish to earn an 8% annual rate of return on your investment?

25
Suppose you won a state lottery in the amount of $10,000,000 to be paid in 20
equal annual payments commencing at the end of next year. What is the present
value (ignoring taxes) of this annuity if the discount rate is 9%?

Annuity Due

A series of consecutive payments or receipts of equal amount at the beginning


of each period for a specified number of periods. To analyze an annuity due
using the tabular approach, simply multiply the outcome for an ordinary annuity
for the same number of periods by (1 + i). Note: Throughout the course, assume
cash flows occur at the end of each period, unless explicitly stated otherwise.

FV and PV of an Annuity Due:

26
FVn = FV of an ordinary annuity (1 + i)
PV = PV of an ordinary annuity (1 + i)

Perpetuities
An annuity that continues forever. Letting PP equal the constant dollar amount
per period of a perpetuity:
PP
PV =
i
Non-annual Periods:

Example: Suppose you invest $1000 at an annual rate of 8% with interest


compounded a) annually, b) semi-annually, c) quarterly, and d) daily. How
much would you have at the end of 4 years?

Annually
FV4 = $1000(1 + .08/1)(1)(4) = $1000(1.08)4 = $1360
Semi-Annually
FV4 = $1000(1 + .08/2)(2)(4) = $1000(1.04)8 = $1369
Quarterly
FV4 = $1000(1 + .08/4)(4)(4) = $1000(1.02)16 = $1373
Daily
FV4 = $1000(1 + .08/365)(365)(4)
= $1000(1.000219)1460 = $137

27
What I have Learned
Find the future value F of the following general annuities.

1. Monthly payments of ₱3,000 for 4 years with interest rate of 3% compounded


quarterly.
2. Quarterly payment of ₱5,000 for 10 years with interest rate of 2% compounded
annually.
3. Annual payments of ₱12,500 with interest rate of 10.5% compounded semi-annually
for 6 years.
4. Semi-annual payments of ₱105,000 with interest rate of 12% compounded annually
for 5 years.
5. Daily payment of ₱20 for 30 days with interest rate of 20% compounded annually.

Find the present value P of the following general annuities.

1. Monthly payments of ₱2,000 for 5 years with interest rate of 12% compounded
quarterly.
2. Quarterly payment of ₱15,000 for 10 years with interest rate of 8% compounded
annually.
3. Annual payments of ₱20,500 with interest rate of 8.5% compounded semi-annually
for 3 4. years.
4. Semi-annual payments of ₱150,000 with interest rate of 8% compounded annually for
10 years.
5. Daily payments of ₱54 for 30 days with interest rate of 15% compounded annually.

What I Can Do
Find the periodic payments of the following general annuities.

1. Monthly payment of the future value of ₱50,000 for 1 year with an interest rate of
10% compounded quarterly.
2. Quarterly payment of an accumulated amount of ₱80,000 for 2 years with interest rate
of 8% compounded annually.
3. Annual payment for the present value of ₱100,000 for 2 years with an interest rate of
12% compounded semi-annually.
4. Semi-annual payment of the loan ₱800,000 for 5 years with an interest rate of 9%
compounded annually.
5. Monthly installment of an appliance cash prize of ₱20,000 for 6 months with an
interest rate of 6% compounded semi-annually.

Answer the following problems.

1. Teacher Kate is saving ₱2,000 every month by depositing it in a bank that gives an
interest of 1% compounded quarterly. How much will she save in 5 years?
2. Milo purchased a new car for ₱99,000 down payment and ₱15,000 every month for 5
years. If the payments are based on 7% compounded quarterly, what is the total cash
price of his car?

28
3. In order to have a fund of ₱1,000,000 at the end of 12 years, equal deposits every six
months must be made. Find the semi-annual payment if interest is at 6% compounded
annually.
4. Which investment is preferable? (Compute for the fair market values). Investment in
AB company offering ₱100,000 at the end of 5 years plus ₱24,000 annually for 4
years afterwards. Investment in XY company offering ₱50,000 semi-annually plus
₱15,000 every 6 months after 6 years. Assumed that money is worth 9% compounded
annually.

A motorcycle is for sale for ₱60,500 cash or monthly installment of ₱3,000 for 2 years at 12 %
compounded annually. If you are the buyer, what would you prefer, cash or installment?

Q2
Week 5 STOCKS AND BONDS
Day 1 -4

What I Need to Know

CONTENT STANDARDS:

The learner demonstrates understanding of basic concepts of stocks

and bonds.

PERFORMANCE STANDARDS: The learners shall 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. M11GM-IIe-1
2. distinguishes between stocks and bonds. M11GM-IIe-2
3. describes the different markets for stocks and bonds. M11GM-IIe-3
4. 36. analyzes the different market indices for stocks and
5. bonds. M11GM-IIe-4

29
What I Know

Activity #1: Read each statement carefully. Identify the following whether it
is a “STOCKS” or “BOND”.
Use ½ crosswise of yellow paper and do not forget to write your complete
name. Fold lengthwise and use the left side. Answers only.
_______________1. Issues of a stake of ownership in a company.
_______________2. Typically traded over the counter (OTC).
_______________3. Generally lower risk, lower reward.
_______________4. A claim to a company’s assets and earnings that often
gives the investor voting rights and pays dividends.
_______________5. Can be made as corporate, municipal or treasury bonds

What’s New

How will you distinguish stocks from bonds?

When a person buys a stock, he is buying a share of the company which makes him a
partial owner. That is the reason it is also referred to as equity. In short, when a company issues a
stock, it is selling a piece of itself in exchange for cash.

On the other hand, bonds represent debt. When a company issues a bond, it is issuing debt
with an agreement to pay back the money with interest.

The table below summarizes the many differences between stocks and bonds.
Stocks Bonds
A form of equity financing or A form of debt financing, or raising money by
raising money by allowing borrowing from investors.
investors to be part owners of the
company.
Stock prices vary every day. Investors are guaranteed interest payments and a
These prices are reported in return of their money at the maturity date.
various media (newspaper, TV,
internet, etc.).
Investing in stock involves some Uncertainty comes from the ability of the bond issuer
uncertainty. Investors can earn if to pay the bondholders. Bonds issued by the
the stock prices increase, but government pose less risk than those by companies
they can lose money if the prices because the government has guaranteed funding
decrease or worse, if the (taxes) from which it can pay its loans.
company goes bankrupt.
Higher risk but with possibility of Lower risk but lower yield
higher returns
Can be appropriate if the Can be appropriate for retirees (because of the
investment is for the long term guaranteed fixed income) or for those who need the
(10 years or more). This can money soon (because they cannot afford to take a
allow investors to wait for stock chance at the stock market)

30
prices to increase if ever they go
low.
Examples
If a company has 1,000 shares If current interest rates are 2% lower than your rate
of stock outstanding and one on a mortgage on which you have 3 years left to
person owns 100 shares, that pay, it’s going to matter much less than it would for
person would own and have someone who has 25 years of mortgage payments
claim to 10% of the company’s left.
assets and earnings.

As we further our discussion, it is important that we are familiar with the following terms
related to stocks:
Stocks refer to the share in the ownership of a company.
Dividend refers to the share in the company’s profit.
Dividend Per Share refers to the ratio of the dividends to the number of shares.
Stock Market refers to a place where stocks can be bought or sold. The stock market in the
Philippines is governed by the Philippine Stock Exchange (PSE).
Market Value refers to the current price of a stock at which it can be sold.
Stock Yield Ratio refers to the ratio of the annual dividend per share and market value per
share. It is also called current stock yield.
Par Value refers to the share amount as stated on the company certificate. Unlike market
value, it is determined by the company and remain stable over time.
What if a certain financial institution declared a ₱ 50,000,000 dividend for the common
stocks, how much is the dividend per share if there are a total of 800,000 shares of common
stock?
Take note that the total dividend is ₱ 50,000,000 and the total share is 800,000.

So, we are asked to find the dividend per share. Dividend per share is total dividend over
total share.
To compute,
𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 50,000,000
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 = = = 62.50
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒 800,000

Therefore, we can say that the dividend per share is ₱ 62.50.


Let us have another one, a certain corporation declared a 5% dividend on a stock with a par
value of ₱ 700.
Mrs. Balbio owns 200 shares of stock with a par value of ₱ 700. How much is the dividend
she received?
Given are dividend percentage = 5%, par value = ₱ 700, and number of shares = 200.
To find Mrs. Balbio’s dividend the formula to use is
Dividend = Dividend Percentage X Par Value x Number of Shares
Dividend = 0.05 (700) (200) = 7,000. Thus, Mrs. Balbio’s dividend is ₱ 7,000.

Let us level up. Corporation ABC has a current market value of ₱47 and give a dividend of ₱
9 per share for its common stock. Corporation XYZ’s current market value is ₱93 and give a
dividend of ₱14 per share. How much dividends shareholders will be getting in relation to the
amount invested?
Given:
Corporation ABC Corporation XYZ
Dividend per Share = ₱ 8 Dividend per Share = ₱ 14
Market Value = ₱ 47 Market Value = ₱ 93

31
Find the shareholders’ dividends base on the amount they invested.

Corporation ABC Corporation XYZ


𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝑆𝑡𝑜𝑐𝑘 𝑌𝑖𝑒𝑙𝑑 𝑅𝑎𝑡𝑖𝑜 = 𝑆𝑡𝑜𝑐𝑘 𝑌𝑖𝑒𝑙𝑑 𝑅𝑎𝑡𝑖𝑜 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
8 14
= = 0.1702 = 17.02% = = 0.1505 = 15.05%
47 93

Base on the computed stock yield ratio of both companies, it shows that Corporation ABC has a
higher stock yield ratio than Corporation XYZ. Therefore, if you are the investor, each of your peso
will earn more if you invest in Corporation ABC. Then, you may say that It is wiser to invest in
Corporation ABC if other factors are equal.
When we speak about bonds, the following terms must be clear to us:
Bond refers to interest-bearing security which promises to pay
a. a stated amount of money on the maturity date, and
b. regular interest payments called coupons.
Coupon refers to the periodic interest payment that the bondholder receives during the time between
purchase date and maturity date; usually received semi-annually.
Coupon Rate refers to the rate per coupon payment period. It is denoted by r.
Price of a Bond refers to the price of the bond at purchase time. It is denoted by P.
Par Value or Face Value refers to the amount payable on the maturity date. It is denoted by F.
If P = F, the bond is purchased at par.
If P < F, the bond is purchased at a discount.
If P > F, the bond is purchased at premium.
Term of a Bond or Tenor of a Bond refers to the fixed period of time, usually in years, at which the
bond is redeemable as stated in the bond certificate. It is the number of years from time of purchase
to maturity date.
Fair Price of a Bond refers to the present value of all cash inflows to the bondholder.

To have a clearer understanding these terms, let us have a simple problem related to bonds. Find
the amount of the semi-annual coupon for a bond with a face value of ₱ 250,000 that pays 7%,
payable semi-annually for its coupon.
Given are the Face Value (F) = ₱ 250,000, and Coupon Rate (r) = 7%.

To get the annual coupon amount, multiply face value by coupon rate. 250,000 (0.07) = 17,500
Then, divide by 2 since we are asked to get the semi-annual coupon amount. 17,500 (½) = 8,750
Thus, the amount of the semi-annual coupon is ₱ 8,750.

Let us always remember that the coupon rate is used only for computing the coupon amount and it
is not the rate at which money grows.

Suppose that a bond has a face value of ₱ 100,000 and its maturity date is 10 years from now. The
coupon rate is 5% payable semi-annually. Assuming that the annual market rate is 4%, what is the
fair price of this bond?

Given are F = ₱ 100,000, r = 5%, Time of Maturity = 10 years, Number of periods = 2 (10) = 20
-This is semi-annually (2) multiplied by the number of years (10), and Market Rate = 4%

0.05
Amount of semi-annual coupon = 100,000 ( ) = 2,500
2

It means that the bondholder receives 20 payments of ₱ 2,500 and ₱100,000 at t = 10. To compute
the present value of ₱ 100,000,
𝐹
𝑃= (1+𝑗)𝑛
, where j is the interest rate per period and n is the number of payment.

100,000 100,000
𝑃= (1+0.04)10
= = 67,556.42
1.0410

32
2
𝑖 (2)
Convert 4% to equivalent semi-annual rate: (1 + 0.04)1 = (1 + )
2
𝑖(2)
= 0.019804
2
1−(1+𝑗)−𝑛 1− (1+0.019804)−20
𝑃=𝑅 = 2,500 = 40,956.01
𝑗 0.019804
and, Price = 67,556.42 + 40,956.01 = 108,512.43. Thus, a price of ₱ 108,512.43 is
equivalent to all future payments, assuming an annual market rate of 4%.

Activity #1: The table below shows the data on 5 stockholders given the par
value, the dividend percentage and the number of shares of stock they have
with a certain corporation. Find the dividend of the 5 stockholders. Use 1 sheet
of yellow paper.
Stockholder Par Value (in Dividend (%) Number of Shares
Pesos)
A 50 3% 100
B 48 2.75% 150
C 35 2.5% 300
D 42 3.12% 400
E 58 3.5% 500

Use Dividend = Dividend Percentage x Par Value x Number of Shares

What I have Learned


Stock is an instrument that signifies ownership in a corporation and represents claim
on a share of a corporation’s assets and profits.
Stocks are typically riskier and long-term investments.

Bonds are interest-bearing certificates used as a way for government or business to


raise money.
The bondholder lends money to the bond issuer for a set amount of time and interest.
When the bonds are “sold” back to the issuer, the interest earned is given to the
bondholder.
Bonds are typically low-risk and good for short-term investments.
Mutual funds are open-ended investments that are professionally managed and
consist of a variety of investment instruments including stocks, bonds, options,
commodities, and money market securities.
Diversification provides greater safety and reduces risk.
Mutual funds are long-term investments.

Assessment

After going through this module, you are expected to:


➢ understand the terms in stock market tables;
➢ interpret and analyze stock tables; and
➢ demonstrate awareness of stock market through newspaper or magazines.

33
I. Analyze the given table and answer the following questions.

52 weeks
HI LO STOCK DIV YLD% VOL(100s) CLOSE NETCHG
85 41 ABC 0.70 1.60 1 500 66 -2
70 22 DEF 0.40 3.10 5600 33 5

1. What was the dividend per share last year for stock ABC?
2. What was the closing price of DEF in the last trading day?
3. For stock ABC, what was the lowest price of stock for the last 52 weeks?
4. For stock DEF, what was the closing price in the last trading day?
5. For stock DEF, what was the highest price of stock for the last 52 weeks?

II. Analyze the given table and answer the following questions.

52 weeks
HI LO STOCK DIV YLD% VOL(100s) CLOSE NETCHG
80 38 GHI 0.80 1.10 1 300 68 -5
75 20 JKL 0.60 2.40 8600 30 3

For Stock GHI:


1. What was the lowest price of the stock for the last 52 weeks?
2. How many shares were traded in the last trading day?
3. What was the dividend per share?
4. What was the annual percentage yield last year?
5. What was the closing price in the last trading day?

For Stock JKL:


1. What was the highest price of the stock for the last 52 weeks?
2. What was the lowest price of the stock for the last 52 weeks?
3. What was the dividend per share last year?
4. What was the annual percentage yield last year?
5. What was the closing price in the last trading day?

34

You might also like