14.00% 9.00% 4.00% 1 2 Scenario 1: 3 4 5 6 7 8 9 10 11 12 18 24 36 48 60 P100M 36 mos Term Loan @ 11.00% P100M 36 mos Time Deposit @ 4.50% Asset Loan Rate Liability Treasury Bank 11.00% 11.00% Depo Rate 4.50% TP Liability 8.50% TP Asset 8.50% NRFF 2.50% 4.50% 8.50% 8.50% 4.00% 0.00% 6.50% 10.00% 8.00% 6.00% 4.00% 1 Scenario 2: 2 3 4 5 6 7 8 9 10 11 12 P100M 36 mos Term Loan @ 11.00% P100M 12 mos Time Deposit @ 4.50% 18 24 36 48 60 Selecting the specific assets – The investor attempts to construct an efficient portfolio.Asset Loan Rate Liability Treasury 11.50% NRFF 2. • one that provides maximum expected return for a given level of risk.50% 6.00% TP Asset 8. • Forecast of local interest rates and exchange rates – Passive portfolio strategy: • Relies on diversification to match the performance of some market index.00% 8. Measuring and evaluating investment performance – Involves measuring the performance relative to some benchmark . • Accumulate funds to purchase a home or other major acquisitions in the future • To accumulate funds to pay for college tuition for children • To have sufficient funds to be able to retire an specified age Establishing an investment policy – Begins with the asset allocation decision.50% Bank 4.50% 2. or • the lowest risk for a given expected return.50% 7. • Forecasts of future interest rates and sector spreads.00% 11.50% 1.00% Depo Rate 4. • Common Stocks • Bonds/Securities • Cash • Real Estate Selecting an investment strategy: – Active portfolio strategy: • Uses available information and forecasting techniques to seek a better performance • Factors influencing the performance of an asset class is important. • Assumes that the market place will reflect all available information in the price paid for the securities.50% TP Liability 7.50% Steps in the Investment Management Process • • • • • Setting investment objectives – Begins with thorough analysis of the objectives of the investor. can be a risky investment. ADDITIONAL SHARES SOLD BY ESTABLISHED. PUBLICLY OWNED COMPANIES: THE PRIMARY MARKET raising of new common stock OUTSTANDING SHARES OF ESTABLISHED. PUBLICLY OWNED COMPANIES: THE SECONDARY MARKET when the owner of shares of stock of a listed company sells his shares • Advantages of Going Public: – Diversification – Liquidity – Facilitates raising new cash – Establishes value for the firm • Disadvantages of Going Public: – Cost of reporting – Disclosure – Self-dealings – Inactive market/low price – Control .Stocks Stock Market • Role of Stock Exchanges: – Raising capital for businesses – Mobilizing savings for investment – Facilitating company growth – Redistribution of wealth – Creating investment opportunities for small investors – Government capital-raising for development projects – Barometer of the economy – Categories of Stock Market Transactions INITIAL PUBLIC OFFERING (IPO) the first sale of stock by a private company to the public. often issued by smaller. can also be done by large privately-owned companies looking to become publicly traded. younger companies for expansion. 5% of transaction cost + 12% VAT) b. Securities fees and taxes on purchases and sales of stocks: FEES/TAXES a. Stock Transaction Tax (½ of 1% value of transaction in lieu of capital gains tax) SELLER BUYER X X X X X X X . Brokerage Commission (maximum of 1. A trader or agent will be assigned to assist in either buying or selling any listed security. Holders have voting rights.00 + 12% VAT d. Transfer Fee of Php 100. Cancellation Fee of Php 20. SCCP Fee of 0. Stockholders or shareholders are part-owner of the company. Investing Procedures Choose a stockbroker. Usually have a specified limited rate of return or dividend.00 + 12% VAT e.STOCKS Stocks are shares of ownership in a corporation. and then get the acknowledgement receipt. Holders are entitled to receive dividends before any dividends are paid to the holders of common stocks. Discuss with the trader what stocks to buy or sell. Open an account with the stockbroker. • TYPES OF STOCKS Common Stocks Usually purchased for participation in the profits and control of ownership and management of the company. Preferred Stocks Name derived from preference given to the holders of these stocks over holders of common stocks.0001 x value of transaction c. Give the order to your broker/trader. 000 shares at P10. Y sells 50.000 shares at P5.00 price per share. The proceeds of the sale is about P250.00 Number of shares x 5.000 shares at P100.60 Exercises Buying Stocks: Compute for the total Cash-out assuming you buy: a.00.00 25.00 . His required cash outflow will be as follows: Market price/share P 25. Answers: .1.00. The amount that he needs is about P125. 10.000.224.000 shares of stock whose market price is P25. X buys 5.40 P244.5% + 12% VAT) SCCP Fee Stock Transaction Tax Cancellation Fee + 12% VAT Net Cash Receivable .Illustration: Buying Transaction: Mr.00 Total Cash Outlay P127.00 price per share b.5% + 12% VAT) + 2.100.502.50 Selling Transaction: Mr. 5.250.00 SCCP Fee + 12.00 price per share.000.200. 100.00 plus charges.00 price per share Selling Stocks: Compute for the total cash inflow assuming you sell: a.000 -----------------P125.00 Broker's Commission (1.000.000 shares of stock whose market price is P5.00 less charges. b.00 22.4.00 Number of shares x 50. 10.000.00 Broker’s Commission (1.000 shares at P20.000 P250. His cash inflow will be as follows: Market price/share P 5.50 Transfer Fee + 12% VAT + 112. Buying: 203.562.60 48.60 • .00 508.492.00 Selling: 978.077.882.