Stocks and Shares

Stocks and Shares Concepts and Formula are well discussed here on this page for candidates that are preparing for the competitive and entrance exams. Check out Stocks and Shares ISA Question with Solution and do practice from it to gain good marks in the examination. Also get basic idea of stock market terms such as face value, market value, dividend, investments etc.

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Stocks and Shares

Stocks and Shares Concepts:

Stock: It is the value of capital of a company, the unit of which is usually Rs. 100 unless stated otherwise. Stock is always bought, sold or held.

4 percent at 85: It means that Rs. 100 stock can be purchased for Rs. 85 and Rs. 4 is the annual income on Rs. 100 stock or Rs. 85 investment or cash spent.

Brokerage: It is the sum of money paid to a stock dealer on the sale and purchase of stocks. It is paid on the face value.
Note: While buying, brokerage is added in the purchase price i.e. it increases the purchase price, whereas while selling, it is reduced from the selling price i.e. it reduces the selling price.

Stock at par: When the cash price or the selling price of the INR 10 stock is INR 10, the stock is said to be valued at par.

Stock above par: When the buying price or the selling price of INR 10 stock is more that INR 10, it is said to be valued at above par. In other words, it is said to be valued at a premium.

Cash: It is the money spent or received while buying or selling the stock. Cash is always invested or received. In other words, when cash is spent, it is also called investment.

Market Price: The price at which that particular stock is bought or sold, it is called the Market Value or the Market price of the stock.

Stock below par: When the buying or the selling price of a stock is less than that of its face value, it is said to be sold at a discount. In other words, it is also said to be sold below par.

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Important Formulas of Stocks and Shares:

• 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 Questions With Solutions

Question 1) A man purchased 300 shares of the face value of Rs. 100 each from the market at Rs. 400 per share. If a dividend of 24% is declared, find his earning percent on the investment.

1. 4%
2. 3%
3. 6%
4. 8%

Answer) (3)

Explanation: Price of 1 share = Rs. 400. Dividend rate = 24%. ∴ Earning % on investment = (24/400) ×100 = 6%.

Question 2) A man invested Rs. 6,600 when he bought Rs. 100 shares at Rs. 110. If 30% dividend is declared, find his annual income.

1. 1800
2. 1300
3. 1150
4. 1 495

Answer) (1)

Explanation: His annual income = (6600 × 30)/110=1800

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Question 3) To produce an annual income of Rs. 1200 in a 4 ½% stock at 94 ½, the amount of investment needed is

1. 25,200
2. 23,000
3. 22,000
4. 21,000

Answer) (1)

Explanation: Stock required = 1200 × (94.5/4.5) =25200

Question 4) If the annual income from 10% stock at 224 is Rs. 42 more than 8% stock at 196, then the investment is

1. 12,000
2. 11,000
3. 10,976
4. 11,048

Answer) (3)

Explanation: Let the investment be Rs. x.

∴ (10x/224) – (8x/196) = 42 ⇒ x = Rs.10976

Question 5) The capital of a company is Rs. 300,000 and is divided into 6,000 shares of common stock. If the company gives a dividend of Rs. 56,000, what amount will Dinesh receive for his 36 shares?

1. 400
2. 360
3. 336
4. None of these

Answer) (3)

Explanation: Income for 3000 shares = Rs. 56,000. ∴ Income for 36 shares = (56000/6000)×36= Rs336

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Question 6) A man invests Rs. 8,100 partly in 14% stock at 294 and partly in 12% stock at 288. If his income from both is the same, find his investment in the 14% stock.

1. Rs 4,320
2. 3,780
3. 2,700
4. 6,400

Answer) (2)

Explanation: Let he invests x at 14% stock.
× Investment at 12% stock = 8100 – x.
As income is same,
x × (14/100) × (1/294) = (8100-x) × (12/100) × (1/288)
⇒ x = Rs.3780

Question 7) How many shares of market value Rs. 25 can be purchased for Rs. 25250?

1. 1,000
2. 1,200
3. None of these
4. 1,010

Answer) (4)

Explanation: Number of shares that can be purchased = 25250/25 = 1,010.

Question 8) A 12% stock yields 16%. The market value of the stock of face value Rs. 100 is

1. 75
2. 133
3. 80
4. 120

Answer) (1)

Explanation: Market value of the stock = (12/16) × 100 = 75

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Question 9) Which is better investment (I) 9% stock at 90 or (II) 8% stock at 88?

1. I
2. II
3. Data insufficient
4. None of these

Answer) (1)

Explanation: If we want to earn an annual income of Rs. 1, we have to invest in

(I) Rs. 90/9 = 10 and in (II) Rs. 88/8 = Rs. 11

So, 1st investment is better because we have to invest lesser amount to earn Re. 1.

Question 10) A company declares a dividend of 6%. Amira owns 1300 shares (par value Rs. 75). How much dividend does she receive?

1. 7800
2. 7200
3. 6000
4. None of these

Answer) (1)

Explanation: Dividend she received = 1300 × 75 × (8/100) = Rs.7800

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