Stocks and Shares – Concepts and Formulas
Stocks and Shares
A large amount of money is needed to start a big business or an industry. This can go beyond one or two individuals’ abilities. As a result, a number of individuals join hands to create a Joint Stock Company.
A number of shares held by a person:
- Stock purchased/sold = Investment × 100/Market Price
- Investment/Cash required = Stock × Market Price/100
- Income/Dividend = Stock × Rate/100
- Stock purchased/sold = Income × 100/Rate%
- Investment/Cash required = Income ×Market Price/Rate%
- Income/Dividend = Investment × Rate/Market Price
Stocks and Shares – Important Formulas & Concepts
Recapitulation of the concepts – I
- Stock Capital: The total amount of money needed to run a company is called it’s stock capital.
- Shares or Stock: The whole capital of the company is divided into equal units. Each unit is called a share or a stock.
- Shareholder or Stockholder: Each individual who purchases one or more shares is called a shareholder (stockholder) of the company. The company issues share certificates to each of its shareholders indicating the number of shares allocated and the value of each share.
- Dividend: The annual profit distributed among shareholders is called a dividend. It is paid annually as per share or as a percentage. The dividend is always paid on the face value of a share.
- 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. The face value of stock always remains the same.
Recapitulation of the concepts – II
- Market Value: The stocks of different companies can be traded (bought or sold) in the market through brokers at stock exchanges. The market value of a share changes from time to time. The price at which a stock is traded in the market is called its market value.
- Brokerage: Stocks of different companies can be traded (bought or sold) in the market through brokers at stock exchanges. The brokers’ charge is called brokerage.
General Questions & Answers – Stocks and Shares Aptitude
1. A man purchased 20 shares Rs 50 at 5 discount, the dividend rate is 13. The interest rate obtained is to:
- A. 12 1/2 %
- B. 13 1/2%
- C. 15%
- D. 16 2/3 %
Answer: Option C (15%)
2. Which one is the better investment: 11% stock at 143 or 9 3/4% stock at 117?
- A. 11% stock at 143
- B. 9 3 /4% stock at 117
- C. Both are equally good
- D. It cannot be compared to the total amount of investment that is not given.
Answer: Option B (9 3 /4% stock at 117)
3. A man purchases Rs. 20 shares charging a dividend of 9 percent. The man needs his money to have a 12 percent return. Each share has a market value of:
- A. Rs. 12
- B. Rs. 15
- C. Rs. 18
- D. Rs. 21
Answer: Option B (Rs. 15)
4. 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: Option B (Rs. 75)
5. In order to have an equal amount of income, Rs. 9800 is invested partly in 9% stock at 75 and 10% share at 80. Investment in stock of 9% is:
- A. Rs. 4800
- B. Rs. 5000
- C. Rs. 5400
- D. Rs. 5600
Answer: Option B (Rs. 5000)
6. Michael earns Rs. 135 by investing in Rs. 1620 in 8% stock. Then, the stock is quoted at:
- A. Rs. 80
- B. Rs. 96
- C. Rs. 106
- D. Rs. 108
Answer: Option B (Rs. 96)
7. A stock of 12% yielding 10% is quoted at:
- A. Rs. 83.33
- B. Rs. 110
- C. Rs. 112
- D. Rs. 120
Answer: Option D (Rs. 120)
8. %Find the investment that is made when someone receives Rs. 20,000 by investing in Rs. 50 shares of 15%
- A. Rs. 5000
- B. Rs. 6000
- C. Rs. 7000
- D. Rs. 8000
Answer: Option A (Rs. 5000)
9. Find the number of stocks that can be purchased at Rs. 8200 at a market value of Rs. 20 with brokerage 2.5%
- A. 420
- B. 410
- C. 400
- D. 390
Answer: Option C (400)
10. Which of those is a better investment?
- A. 10% stock at 80
- B. 15% stock at 70
- C. 12% stock at 75
- D. All of the above
Answer: Option D (All of the Above)
11. Find the stock’s market value if 6% yields 10%.
- A. 60
- B. 70
- C. 80
- D. 100
Answer: Option A (60)
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