‘Stocks and Shares’ is an important topic of the Quantitative Aptitude section for all competitive examinations. To solve the questions of ‘Stocks and Shares’, you must know the terms and formulas of ‘Stocks and Shares’. Practicing questions within the time limit becomes important for the candidates.
In the following article, we have discussed the important terms, concepts, formulas, and practice questions related to ‘Stocks and Shares’. So try and practice the following questions about stocks and shares to improve your score in the exams.
Stocks and Shares: Concepts
Those people who are interested in dealing with stock and shares must have knowledge about the given below terms, which are highly used in the share market-
1. Stock Capital
To run a company, a certain amount of money is needed. This certain amount of money is called Stock Capital. One must have a strong understanding of it.
For Example- If a Pvt Ltd. Company has issued 2000 shares at a price of rupees 500 / share, the capital stock value would be rupees 1000000.
Types of Capital Stocks
1. Common Stock- It gives Share holders or Stock holders more right to vote over a company’s decision
2. Preferred Stock- These stocks are like Bonds and Dividend
2. Stock or Share
The total Stock Capital is divided into small parts or units. These small units are called Shares or Stocks.
The company provides a share certificate for showing the number of shares of a person or the value of each share.
The person who holds a share is called a shareholder or stockholder.
For Example- Ritu has invested in stocks, which means she has a portfolio of different company shares.
On the other hand, share means a single unit of ownership in a company.
Types of Stocks
There are mainly two types of Stocks –
1. Common Stocks
2. Preferred Stocks
These stocks are further divided into the following categories-
- Growth Stocks
- Income Stocks
- Value Stocks
- Blue Chip Stocks
Types of Shares
A company can issue various types of share based on their rights but mainly are two types of shares-
1. Common Shares : Examples can be- J P Morgan Chase, Microsoft Corporation, Colgate Palmolive
2. Preference Shares : Preferred shares can be further classified as ordinary or common stocks of a company. For Example-Participatory and Non-participatory shares, Convertible and Non-convertible shares, Cumulative or Non-cumulative shares etc.
3. Nominal Value or Face Value
Face value is the value of a stock that is printed on the share certificate.
Examples- Face Value of a Bond Paper, Any Item price in a Supermarket is known as its face or nominal value, in the same way, the Total amount deposited in any account of a Bank is its face value.
4. Market Value
In an open market, the shares or stocks of different companies are bought and sold through brokers at different stock exchanges. Market value is identified in three ways –
i) Market value < Face value, when it is at discount.
ii) Market value = Face value
iii) Market value > Face value, when it is at a premium.
Through an example, we will understand market value.
Ex: If an Rs. 1000 share is quoted at a discount of 100, the market value of the stock = (1000 – 100) = 900
If an rs. 1000 shares is quoted at a premium of 100, the market value of the stock = (1000 + 100) = 1100
For Example- Avinash wants to sell his 3 BHK Flat in 90 Lacs, But he didn’t get any buyer who could purchase his flat on or above 90 Lacs. His flat is situated in the prime location of City and as per the circle rate of that area 3 BHK flats have min value of 90 lac and it would have a 1.5 cr. value in near future. But the Market value of his flat will be considered only 90 Lacs.
5. Dividend
It is an annual profit that is distributed among the shareholders. The dividend is distributed annually as per the share. It is always paid on the face value of the share, not on the market value.
For Example- Dabur Pvt. Ltd. announced 10 rupees per share dividend for their shareholders. Then an investor, who has 100 shares of Dabur company will receive 1000 rupees as a dividend.
6. Brokerage
It is a charge which is deducted by the broker. It is deducted in two ways –
i) When stock is sold, the brokerage is subtracted from the selling price of the stock or share.
ii) When a stock is bought, the brokerage is added to the cost price of the stock or share.
Note :
1. Dividend is paid annually on the face value of a share.
2. The face value of a share is fixed ( same). It is not changed from time to time.
3. The market value of a share changes from time to time.
For Example- When any investor don’t have sufficient knowledge about the share market and still wants to grow his money through the share market, then such an investor or individual takes the service of such agencies or people who have expertise in the share market and they charge some commission for it is known as brokerage.
Important Formulas of Stocks and Shares
- Number of shares = Total investment / Investment in 1 share = Total Income / Income from 1 share = Total face value / face value of 1 share
- Stock bought/sold = (investment × 100)/Market value = (income × 100)/R%
- Investment = (stock × market value)/100 = (Income × market value)/R%
- Income/Dividend = (Stock × Rate )/100
Sample Questions on Stocks and Shares
Q1. A person invested in 8% stock at 80 and earned Rs.1000. Find his investment.
A) Rs. 8000
B) Rs. 10000
C) Rs. 12000
D) Rs. 15000
Answer: B
Explanation:-
Market value = 80
Face value = 100
Dividend = 8% of face value =Rs.8
So, Investment = (Income × market value)/R%
= (1000 × 80)/8
= Rs. 10,000
Thus, the investment is Rs. 10000.
Thus, the correct option is B.
Q2. An investor invested in 20% stock at Rs. 120 and earned Rs. 500. Find his investment.
A) Rs. 3000
B) Rs. 2500
C) Rs. 5000
D) Rs. 1000
Answer: A
Explanation:-
Income = 500 ; Market value = 120 ; Rate = 20%
So, Investment = (income × market value)/R%
= (500 × 120)/20
= 3000
Therefore, His investment is Rs. 3000.
Thus the correct option is A.
Q3. A businessman buys 10 shares of Rs.100 at 10 discount, and the rate of dividend is 30. Find the rate of interest.
A) 12%
B) 20%
C) 25%
D) 33â…“%
Answer: D
Explanation:-
Here, investment = 10 × (100 – 10) = 900
Face value = Rs. 1000
Dividend = (30 × 1000)/100 = 300
Interest = (Dividend × 100)/investment
= (300 × 100)/900 %
= 33â…“ %
Thus, the rate of interest is 33â…“%.
The correct option is D.
Q 4. Find the cost price of an Rs.200 stock at a 12 discount, when the brokerage is 4%.
A) 92
B) 100
C) 112
D) 88
Answer: A
Explanation:-
Face value = 100
Discount = 12%
Brokerage = 4%
Thus, Cost price = 100 – 12 + 4 = 92
Therefore the correct option is A.
Q 5. What is the market value of a 15% stock yielding 5% quoted?
A) Rs. 200
B) Rs. 105
C) Rs. 600
D) Rs.300
Answer: D
Explanation:-
Face value = 100
Market value = (100 × 15)/5 = 300
Thus, the correct option is D.
Q 6. Rakesh invests Rs.1800 in a stock at 90 and earns Rs.180 then find his dividend.
A) 6%
B) 9%
C) 3%
D) 10%
Answer: B
Explanation:-
Income is Rs.180 when investment is Rs.1800
Now investment is Rs.90, then income = (180 × 90)/1800 =Rs. 9
Therefore, his dividend is = 9%
Thus, the correct option is B.
Q 7. An investor invested Rs.12550 in Rs.15 shares quoted at Rs.12.5, then find the number of shares of the investor.
A) 1004
B) 1200
C) 550
D) 735
Answer: A
Explanation:-
Number of shares = (12550/12.5) = 1004
Thus, the correct option is A.
Q 8. What is the cost price of an Rs.100 stock at a 20 discount and brokerage is 1%?
A) 90
B) 80
C) 81
D) 79
Answer: C
Explanation:-
Face value = 100
Discount = 20
Brokerage = 1%
Cost price = ( 100 – 20 + 1) = 81
Thus, the correct option is C.
Q 9. An investor invested Rs. 12550 in Rs.20 shares quoted at Rs 12.50. What is his annual income of the rate of dividend is 11%.
A) 2208.80
B) 2000.50
C) 2500
D) 2800.80
Answer: A
Explanation:-
Number of shares = (12550/12.5) = 1004
Face value = (1004 × 20) = 20080
So, annual income = (11 × 20080)/100
= Rs.2208.80
Thus, the correct option is A.
Q 10. Find the amount of a stock quoted when the investment is Rs.15000 in 15% stock and earning is Rs.150.
A) 1200
B) 1800
C) 1500
D) 2500
Answer: C
Explanation:-
Earning is Rs.150 when the investment is Rs.15000.
To earn Rs. 15 , investment be = (15000 × 15)/150
= RS. 1500
Thus, the correct option is C.
Also Practice:
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