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  

Total InvestmentInvestment in 1 share=Total IncomeIncome from 1 share=Total Face ValueFace Value of 1 share

 

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.   

9120×100% = 712%

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 = 14400120=120.

 

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

 

Annual income = Rs (5/100*12000) = Rs. 600

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11 7870
Q:

A man invested Rs. 1552 in a stock at 97 to obtain an income of Rs. 128. The dividend from the stock is:

A) 8.5% B) 7.5%
C) 8% D) 9%
 
Answer & Explanation Answer: C) 8%

Explanation:

By investing Rs. 1552, income = Rs. 128.

 

By investing Rs. 97, income =Rs.1281552×97= Rs. 8.

 

Dividend = 8%

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1 7116
Q:

A man bought 20 shares of Rs. 50 at 5 discount, the rate of dividend being 13 12 . The rate of interest obtained is:

A) 13% B) 12
C) 15% D) 16%
 
Answer & Explanation Answer: C) 15%

Explanation:

Investment = Rs. [20 x (50 - 5)] = Rs. 900. 

 

Face value = Rs. (50 x 20) = Rs. 1000.

 

Dividend   = Rs.272*1000100=Rs.135 

 

Interest obtained = 135900*100 % = 15%

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1 6814
Q:

A man invests some money partly in 9% stock at 96 and partly in 12% stock at 120. To obtain equal dividends from both, he must invest the money in the ratio:

A) 3:5 B) 2:1
C) 16:15 D) 4:5
 
Answer & Explanation Answer: C) 16:15

Explanation:

For an income of Re. 1 in 9% stock at 96, investment = Rs. 96/9 = Rs.32/3

For an income Re. 1 in 12% stock at 120, investment = Rs. 120/12 = Rs. 10.

Ratio of investments =(32/3) : 10 = 32 : 30 = 16 : 15.

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2 5753
Q:

The market value of a 10.5% stock, in which an income of Rs. 756 is derived by investing Rs. 9000, brokerage being 14%  is :

A) Rs.108.25 B) Rs.112.20
C) Rs.124.75 D) Rs.125.25
 
Answer & Explanation Answer: C) Rs.124.75

Explanation:

For an income of Rs.756, investment = Rs.9000 

 

For an income of Rs.212, investment = Rs.9000756*212 = Rs.125 

 

For a Rs.100 stock, investment = Rs.125.

 

Market value of Rs. 100 stock  = Rs.125-14 = Rs. 124.75

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4 5364
Q:

Find the annual income derived from Rs. 2500, 8% stock at 106?

A) 100 B) 200
C) 150 D) 250
 
Answer & Explanation Answer: B) 200

Explanation:

Income from Rs. 100 stock = Rs. 8.

 

Income from Rs. 2500 stock = Rs8100*2500 = Rs. 200.

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0 5123
Q:

Find the cost of 96 shares of Rs. 10 each at 34 discount, brokerage being 1/4 per share.

A) 912 B) 921
C) 920 D) 900
 
Answer & Explanation Answer: A) 912

Explanation:

Cost of 1 share  =Rs.10-34+14=Rs192  

 

Cost of 96 shares  = Rs.192*96 = Rs. 912.

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5 5081
Q:

A man buys Rs. 25 shares in company which pays 9 % dividend. The money invested is such that it gives 10 % on investment. At what price did he buy the shares?

A) 22.50 B) 22
C) 20.45 D) 12.50
 
Answer & Explanation Answer: A) 22.50

Explanation:

Suppose he buys each share for Rs. x.

 

Then, Rs.25*9100=x*1010 or x = Rs. 22.50.

 

Cost of each share = Rs. 22.50.

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3 5023