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

A) 70 B) 76
C) 75 D) 80
 
Answer & Explanation Answer: C) 75

Explanation:

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

 

For an income of Rs. 6, investment = Rs.1008*6= Rs. 75.

 

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

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1 2384
Q:

Which is better investment : 11% stock at 143 (or) 9 3/4% stock at 117 ?

A) Both are equally good B) 9 3/4% stock at 117
C) Cannot be compared, as the total amount of investment is not given D) 11% stock at 143
 
Answer & Explanation Answer: B) 9 3/4% stock at 117

Explanation:

Let investment in each case be Rs. (143 x 117).

 

Income in 1st case = Rs.11143 x 143 x 117 = Rs. 1287.
Income in 2nd case = Rs.394×117 x 143 x 117= Rs. 1394.25

 

Clearly, 9 3/4% stock at 117 is better.

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7 2246
Q:

The cash realised on selling a 14% stock at Rs. 106.25, brokerage being 14%, is :

A) RS.105.50 B) RS.106
C) RS.106.50 D) RS.113.75
 
Answer & Explanation Answer: B) RS.106

Explanation:

Cash realised = Rs. (106.25 - 0.25) = Rs. 106.

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1 1827
Q:

Find the cost of Rs. 6400, 10% stock at 15 discount?

A) 2000 B) 5440
C) 6000 D) 5140
 
Answer & Explanation Answer: B) 5440

Explanation:

Cost of Rs. 100 stock   = Rs. (100-15)

 

Cost of Rs. 6400 stock = Rs.85100*6400 = Rs. 5440.

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1 1719
Q:

Find the annual income derived by investing Rs. 6800 in 10% stock at 136.

A) Rs.500 B) Rs.100
C) Rs.520 D) Rs.340
 
Answer & Explanation Answer: A) Rs.500

Explanation:

By investing Rs.136, income obtained = Rs. 10

 

By investing Rs 6800, income obtained = 6800×10136= Rs.500

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0 1641
Q:

Mr. Shankar spends 25% of his monthly salary on household expenditure, 20% of the remaining on children’s education, and the remaining is equally invested in three different schemes. If the amount invested in each scheme is Rs.5600, what is the monthly salary of Shankar ?

A) Rs. 34000 B) Rs. 31245
C) Rs. 24315 D) Rs. 28000
 
Answer & Explanation Answer: D) Rs. 28000

Explanation:

Let the monthly salary of Shankar be = Rs.x
Amount invested on expenditure = 25% = x/4;
Remaning amount = 3x/4;
Amount invested on children education = 20% i.e = 3x/20;
Remaining amount = 3x/4 - 3x/20 = 3x/5;
Remaining amount invested in three different schemes i.e is 1/3(3x/5)
=> x/5 = 5600
Therefore x = 28000
Hence, Monthly salary of Shankar is Rs. 28,000.

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4 1595