Stocks and Shares Questions

FACTS  AND  FORMULAE  FOR  STOCKS  AND  SHARES  QUESTIONS

 

 

1. Stock-capital: The total amount needed to run the company is called the stock-capital

 

2. Shares or stock: The whole capital is divided into small units, called shares or stock. For each investment, the company issues a share-certificate, showing the value of each share and the number of shares held by a person. The person who subscribers in shares or stock is called a share holder or stock holder.

 

3. Dividend: The annual profit distributed among share holders is called dividend. Dividend is paid annually as per share or as a percentage.

 

4. Face Value: The value of a share or stock printed on the share-certificate is called its Face Value or Nominal Value or Par Value.

 

5. Market Value: The stocks of different companies are sold and bought in the open market through brokers at stock-exchanges. A share (or stock) is said to be:     

(i) At premium or Above par, if its market value is more than its face value.

(ii) At par, if its market value is the same as its face value.

(iii) At discount or Below par, if its market value is less than its face value. Thus, if a Rs.100 stock is quoted at a premium of 16, then market value of the stock = Rs. (100+16) = Rs. 116. Likewise, I f a Rs. 100 stock is quoted at a discount of 7, then market value of the stock = Rs. (100-7) = Rs. 93.

 

6. Brokerage: The broker’s charge is called brokerage.

(i) When stock is purchased, brokerage is added to the cost price.   

(ii) When stock is sold, brokerage is subtracted from the selling price.

Remember:

(i) The face value of a share always remains the same.  

(ii) The market value of a share changes form time to time.

(iii) Dividend is always paid on the face value of a share.

(iv) Number of shares held by a person  

 

Thus, by a Rs. 100, 9% stock at 120, we mean that:

(i) Face Value (N>V) of stock = Rs. 100.  

(ii) Market Value (M>V) of stock = Rs. 120.  

(iii) Annual dividend on 1 share = 9% of face value = 9% of Rs. 100 = Rs. 9.   

(iv) An investment of Rs. 120 gives an annual income of Rs. 9.

(v) Rate of interest p.a = Annual income from an investment of Rs. 100.   

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Q:

The cost price of a Rs.100 stock at 4 discount, when brokerage is % is :

A) Rs.95.75 B) Rs.96
C) Rs.96.25 D) Rs.104.25
 
Answer & Explanation Answer: C) Rs.96.25

Explanation:

CP. = = Rs.96.25

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8 6354
Q:

A man buys Rs. 20 shares paying 9% dividend. The man wants to have an interest of 12% on his money. The market value of each share is:

A) 12 B) 15
C) 18 D) 20
 
Answer & Explanation Answer: B) 15

Explanation:

Dividend on Rs. 20 = Rs. (9/100)x 20 = Rs.9/5.

Rs. 12 is an income on Rs. 100.

Rs.9/5 is an income on Rs.[ (100/12) x (9/5)] = Rs. 15.

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9 5143
Q:

A 6% stock yields 8% . The market value of the stock is :

A) Rs.48 B) Rs.75
C) Rs.96 D) Rs.133.33
 
Answer & Explanation Answer: B) Rs.75

Explanation:

For an income of Rs. 8, investment = Rs. 100.

For an income of Rs 6, investment =Rs. \inline \left ( \frac{100}{8} \times 6\right ) = Rs. 75

Market value of Rs. 100 stock = Rs. 75.

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11 4288
Q:

A man invested Rs. 14,400 in Rs. 100 shares of a company at 20% premium. If his company declares 5% dividend at the end of the year, then how much does he get?

A) Rs.500 B) Rs.600
C) Rs.650 D) Rs.720
 
Answer & Explanation Answer: B) Rs.600

Explanation:

Number of shares = =120.

Face value = Rs.(100 x 120) = Rs.12000.

Annual income =  = Rs. 600

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9 3979
Q:

A 12% stock yielding 10% is quoted at:

A) 67 B) 110
C) 112 D) 120
 
Answer & Explanation Answer: D) 120

Explanation:

To earn Rs. 10, money invested = Rs. 100.

To earn Rs. 12, money invested = = Rs. 120.

Market value of Rs. 100 stock = Rs. 120.

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3 3606