Your grandparents gave you P 175,000.00 on your 16th birthday. You were instructed to invest the money so that the earnings can be used to pay for your tuition fee in college. Having heard about the risks and rewards of the stock market from your parents, you become interested in buying stocks in a particular company. Below are the options given to you by your parents: Option1: Company ABC's selling stock is P 1,500.00 per share that will have a dividend of P 200.00 per year. The stock can be sold after two years at P2,000.00 and the market requires a rate of return of 15%. Option2: Company XYZ's selling stock is P 1,000.00 per share that will have a dividend of P 180.00 per year. The stock can be sold after two years at P2,000.00 and the market requires a rate of return of 7%. In which company will you invest your money? why?
Reflection. Going back to our first problem, it is time to review our answers. You can now decide correctly after learning experiences.
Scenario 1.
Your grandparents gave you P 175,000.00 on your 16th birthday. You were
instructed to invest the money so that the earnings can be used to pay for your
tuition fee in college. Having heard about the risks and rewards of the stock
market from your parents, you become interested in buying stocks in a particular
company. Below are the options given to you by your parents:
Option1: Company ABC's selling stock is P 1,500.00 per share that will have a
dividend of P 200.00 per year. The stock can be sold after two years at P2,000.00
and the market requires a
Option2: Company XYZ's selling stock is P 1,000.00 per share that will have a
dividend of P 180.00 per year. The stock can be sold after two years at P2,000.00
and the market requires a rate of return of 7%.
In which company will you invest your money? why?
Scenario 2.
Suppose that you withdraw P 1,500.00 from your savings account. Over the
weekend, several people want to borrow money from you. Read the stories and
decide to whom you will lend your money.
Story1. Your younger sister is having a garage sale. She needs cash to make
change for the day. She will sell you a bond for P 1,000.00 You will keep the
bond for a week, and she promises to pay you back.
Story2. Your older brother has a small business idea but doesn't have any
money. He wants to borrow your P 1,500.00 and promises to pay you back P
1,800.00 in four weeks.
Story3. Your best friend at school, whom you know very well, wants to borrow
your P 1,500.00 to buy cupcakes. She plans to sell at a higher price and
promises to pay you back P1,700.00 in two weeks.
Whose bonds will you buy? Why?
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