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16.1
BASIC FACTS
(i) The capital of a company is called the Stock, e.g. 5% stock at 97 J!leans that if a person invests
Rs 97, he can buy stock worth Rs 100 and his annual income is Rs 5. (ii) The convenient unit in which the capital stock of a joint stock company is divided, is called a Share. These shares are generally worth Rs 10 and Rs 100 each. The company raises its capital by means of selling such shares. (iii) .The persons who purchase shares are called Share Holders. (iv) The part of the profit of a company which is divided among the share holders is called Dividend. For example, a 20% dividend means that on a share of Rs 100, the share holder gets Rs 20; on a share of Rs 10, he gets Rs 2 and so on. (v) The value at which a company issues shares is called the Nominal Value, Face Value or Par Value of the share. This value is printed on the share certificate. (vi) The value at which a share is available in market is known as Market Value of the share. (vii) If the Market Value = Face Value, share is at par. (viii) If the Market Value> Face Value, share is at premium or above par. (ix) If the Market Value < Face Value, share is at discount or below par. (x) When a company likes to borrow money from the shareholders or public for a Fixed Period at a Fixed Rate of Interest, the company issues Debentures. So, debentures are a Debt for a company. (xi) A debentureholder receives interest on the face value of debentures at a rate fixed by the company. The interest does not vary. (xii) Dividend on Shares is calculated on Face value (xiii) Interest on Debentures is calculated on Face value. (xiv) Shares and Debentures, are generally sold or purchased in a market known as Stock Exchange through authorised persons known as Sharebrokers (Brokers). (xv) Broker's commission is called Brokerage. (xvi) Brokers charge commission from the purchasers and also from the sellers. (xvii) Brokerage is calculated on Market Value of ShareslDebentures. (xviii) Share Purchaser has to pay (Market Value + Brokerage) (xix) Share Seller will get (Market Value  Brokerage)
162 16.2
Quantitative Aptitude for Competitive Examinations
APPROACH TO PROBLEMS ON STOCK
For example,
(a) 3% Rs 100 stock at Rs 96 By investing Rs 96, one can purchase stock of Rs 100. Hence, market price of the stock = Rs 96 . . income = Rs 3 from an investment of Rs 96.
So, to obtain Re 1 income from the stock, the person is to invest = Rs 96 3
=
Rs 32
(b) 3% stock yielding Rs 240 a year He earns an income = Rs 3 from Rs 100 stock
Rs 240 is earned from ~ 100 x 240 = Rs 8,000 stock
3
amount of stock purchased = Rs 8,000 #By investing Rs 1121., a person gets 2
(c) Investment ofRs 1,125 in 3% stock at 112 ~
a stock of Rs 100
So, an investment of Rs 1,125 will allow the purchase of stock worth 100 x (1l2~ )
112
2
amount of stock purchased
=
=
Rs 1,000
Rs, 1,000
So, annual income after purchase of stock =
1125) x 3 ( 1121
2
= Rs
30
(d) Sale proceeds from Rs 4,000 stock at 92 By selling Rs 100 stock, cash realised
Sale proceeds from Rs 4,000 stock = x 4,000 100 = Rs 3,680 16.3 APPROACH TO PROBLEMS ON SHARE
= Rs 92
92
(a) Face value is the value of share printed by the company. Market value is the value of share available in the market. It varies from time to time. • If the share is at par, then market value = face value • If the share is at premium, then market value = face value + premium • If the share is at discount, then market value = face value  discount (b) Brokerage is expressed as the percentage of market value of share. (c) During purchase of each share, the share holder has to pay the brokerage percentage as a commission to the broker. Therefore Purchase value of 1 share = market value + (% brokerage x market value) = market value (1 + % brokerage) But, in case a person purchases directly from the company, he need not to pay brokerage, then, purchase value of 1 share = market value
MEMORY TABLES
Table 16.1
Part I
No. of Stock =
Formulae on Stock
JJI IV
Sale Realisation M.V.  brokerage
11
Total Stock 100
v
Annual Income Rate %
Purchase Cost' M. V . + brokerage
*Purchase Cost = Total Investment NB: Equate any of the TWO PARTS to find out the unknown as per the data available.
Table 16.2
Part
I No. of Shares = /I
Formulae on Shares and Debentures
/II Sale Realisation M.V. (1 % brokerage)
IV
Annual Income x 100 Dividend % x Face Value
Investment (or Purchase Cost) M.V. (1 + %brokerage)
NB:
Equate any of the TWO PARTS as per the requirements of the given problem. M.V. stands for Market Value of one share/debenture/stock.
a'I I
W
....
I~~~~':__

~~~~~
164
Quantitative Aptitude for Competitive Examinations
(d) During sale of each share, the share holder has to again pay the % brokerage as a commission to the broker. Therefore, Sale value (or sale earning) of 1 share = market value  (% brokerage x market value) = market value (1  % brokerage) (e) Investment is the total amount invested in purchasing a certain number of shares at the market value. It implies that if a person purchases 'n' shares, then his investment = n x purchase value of 1 share (0 A company pays dividend (share of the profit) to each shareholder. The dividend is normally a certain percentage of the face value of each share or a certain amount for each share. The dividend has no relation with the market value of the share. In fact, this dividend is the annual income or the return on investment for the shareholder. Hence Annual income on one share = face value x % dividend Total income on 'n' no. of shares = n x face value x % dividend
(g) Actual rate per cent on investment = .~'
income investment From (e) and (D, it can be concluded that: Number of shares
.
x 100
=
n=
investment  = purchase value of one share
annual income (face value x % dividend)
'f
annual income of one share
Solved Example. El Find the cost of
(a) Rs 5,000, 8 2 % stock at 95
3
1 (b) Rs 3,000, 72:% stock at par (c) Rs 2,500, 7% stock at 10 premium (d) Rs 1,000, 3t % stock at 8 discount
(e) Rs 2,200, 6% stock at par (brokerage 111 ) %
(D Rs 2,000, 5 t % stock at 5 premium
( brokerage
1
%)
(g) Rs 1,000, 6% stock at 6 discount ( brokerage
1
%)
Shares and Debentures
165
S1 While finding the purchase cost, neglect the rate % data
(a) Cost of purchase = Amount of stock x Market Value 100
[Refer Parts II and ill in Table J 1
=
5,000 x 100
95
=
Rs 4,750.
(b) Since it is at par, .. Cost of purchase = Amount of stock = Rs 3,000. (c) Here, the stock is at 10 premium. .. Market Value = (100 + Premium) = 110 .. Cost of purchase = Amount stock x
= 2500
Market Value 100
x 100
..
110
= Rs 2,750.
(d) Here, stock is at 8 discount, :. Cost of purchase
Market Value = 100  discount (100  discount) 100
= =
Amount of stock x 1,000 x 100
92
=
Rs 920. (brokerage
(e) Brokerage is added while purchasing the stock .. Purchase Cost = Amount of stock x
=
+ Market Value)
100
2,200 ( 100  x 100
+ 11
1) (Since it is at par Market Value = 100)
1,101 x = Rs 2,202. 11 (1) Market Value= 100 + Premium = 100 + 5
= 22
Purchase Cost = Amount of stock x 100+S+! 100
(Market Value + brokerage) 100
=
2000 x
=
Rs 2,110.
(g) Market Value = 100  discount = 100  6 Purchase Cost = Amount of stock x 1006+} 100 (Market Value + brokerage) 100
= 1,000
x
= Rs 945. (brokerage
E2 Find the cash realised by selling Rs 2,000, 5% stock at 6 premium S2 Brokerage is subtracted when stock is sold.
1
%).
166
Quantitative Aptitude for Competitive Examinations (Market Value  brokerage) 100
..
Sale Realisation = Amount of stock x
(100+61)
= Rs 2,110. 100 E3 How much stock should be sold to realise Rs 1,221 from 5% stock at = 2,000
x
2
±
premium
(brokerage
1
% ). x 100
[Refer Parts II and N in Table l}
S3 Amount of stock
=
Sale Realisation ~~~~~~~~ (Market Value  brokerage)
1,221 1 I x 100 = Rs 1,200. 100+242 E4 How much 6% stock at 8 discount can be purchased by investing Rs 1,850 (brokerage
1
% ).
S4 Since Market Value = 100  discount .. Amount of Stock =. Purchase Cost (100  discount + brokerage) 1,850 1008+x 100
1 x vl00 = Rs 2,000. 2
E5 S5 E6 S6
Hence stock being at 8% discount, by investing Rs 1,850, one can purchase stock of Rs 2,000 (which is more than Rs 1,850). Find the annual income derived from Rs 2,800, 4% stock at 122? Annual Income = Total Amount of stock x % rate of stock = 2,800 x .04 = Rs 112. Find the annual income derived by investing Rs 2,800, in 4% stock at 112? Note, here total investment is Rs 2,800 But amount of stock purchased is not known. :. Annual Income = Investment x % rate of stock (Market Value + brokerage) 100
[Refer Parts II and V in Table l}
= 2,800 112
x 4 = Rs 100. (brokerage
E7 What rate % is obtained by investing in 7% stock at 5 discount S7 Amount of rate per cent Annual Income =
=
± %).
Income by investment of Rs 100 x % rate of stock
[Refer Parts ill and V in Table 1]
Investment (Market Value + brokerage)
Shares and Debentures = __ ==100:....:...._,,x7= 100 1 1 0.05 + 0.0025 1%5+% 4 735 Rate % obtained = 100 = 7.35%.
167
x7
=
735
E8 Find the market value of a 6% stock in which an income of Rs 244 is derived by investing Rs 1,220, brokerage being
±
%. [Refer Parts 1Il and V in Table IJ
88
Annual Income Rate % 244
Investment = ~~~~~~~~ (Market Value },220 = Market Value + _!_
4 1 4
+ brokerage)
6
:.Market Value +
= 30
~
Market Value = 29.75.
E9 How much should one invest in 6%% stock at 110 to secure an annual income of Rs 300.
89
Annual Income Rate %
Investment Market Value + % brokerage 20 3x110 30 x 110 x 300 20 ~ I
{Refer Parts 1fI and V in Table 1]
1=
I=
300
=
Rs 4,500
The investment is Rs 4,500.
EIO Find what a purchaser would have to pay for 250 shares ofRs 20 each quoted at Rs 74. What would be the gain to the share holder, if be had purchased the shares at par? 810 Face Value of 1 share = Rs 20 Market Value of 1 share = Rs 74 The amount paid by the buyer (purchaser) = 250 x 74 = Rs 18,500 The Purchase Cost by share holder = 250 x 20 = 5,000 :. Gain by the share holder = 18,500  5,000 = Rs 13,500.
E11 A man invests Rs 4,220 in 6t % stock at 105. On selling the invested stock, how much will he
realise? (brokerage =
± %).
=
Investment
811 Here, amount of stock is not known.
Purchase cost of stock Sale Realisation Market Value  brokerage Sale Realisation 1 1052 4,220 105 +
=
Rs 4,220 Purchase Cost
Market Value
+ brokerage
[Refer Pans III and N in Table 1]
=
t
168
Quantitative
Aptitude
for Competitive
Examinations
~
Sale Rea1isaton =
4,220 x 104.25 105.5 = Rs 4,180.
E12 Find the purchase cost of 80 shares of Rs 10 each at ~ discount, brokerage being ~ per share. 812 Since Market Value = Face Value  discount
Cost of 1 share = Face Value  discount + brokerage
= 10
1+1 = 91+1 = 9&
8 8 8 8 8
=
Rs91
4
3 Cost of 80 share = 80 x 94" = (80
x
9) +
(~x
80) = Rs 780.
E13 A man seils Rs 4,500, 5% stock at 120 and invests the proceeds partly in 3% stock at 99 and partly
in 8% stock at 132. He thereby increases his income by Rs 75. Howmuch of the sale proceeds were invested in each stock?
813 Sale Realisation =
(Market Value  brokerage) 100 120 100 x 4,500
x Amount of stock
=
=
Rs 5,400
Income before selling = Total Amount of stock x % rate of stock
=
5 4,500 x 100
=
225
Income after sale from two stocks = 225 + 75 = Rs 300 Now, let, Rs x of sale proceeds be invested in 3% stock at 99 and Rs (5,400  x) be invested in 8% stock at 132. . . Income from I stock + Income from II stock = 300
= 300 99 112 .. x = Rs 900 invested in 3% stock at 99 and 5,400  x = Rs 4,500 invested in 8% stock at 132. A man invested Rs 2,592. When he bought shares of a company at Rs 108 each, the face value of

xx3
+
(5,400x)
x8
E14
a share was Rs 100. The company paid at the end of the year.
12t%
dividend. Find the dividend earned (income derived)
814 Dividend is always calculated on Face Value. Equating Parts II and IV of Table 2,
Annual Income x 100 we get, Dividend % x Face Value Annual Income x 100 25 x 100 2 Income derived = Investment = ~~~~~~~~~~ Market Value (1 + % brokerage) 2,592 108
=
2
;ioo i~~
x
x 2,592
=
Rs 300.
Shares and Debentures E15 Find the income derived from 88 shares of Rs 20 each at 5 premium
(Brokerage
169
±
per share), the
rate of dividend being 4± %. Also find the rate of interest on this investment.
S15 Dividend earned (income)
= :1=00=
% rate of dividend
x Face Value x Number of shares
[Refer Parts I and IV of Table 2J
17 4 x 100 x 20
X
88 = Rs 74.80
Purchase Cost of one share = Face Value + Premium + brokerage = 20 + 5 + ± = 25± % Rate of interest on the investment,
= % rate of dividend
x
Face Value Purchase Cost

=
4"
17
X
20 101 = 3.37%.
4
E16 A man invested Rs 4,444 in the shares of face value Rs 100 and at 15% dividend, his income was S16 Brokerage is always calculated on Market
Rs 600. Find the quoted price (Market Value) of each share if brokerage is 1 %. Value. Let the market value of each share = Rs M [Refer Parts II and IV of Table 2J Investment  Dividend % x Face Value =~~~~Market Value (1 + % brokerage) 4,444 M (1 + 1 %) .. 600 x 100 15 x 100 Annual Income x 100
M = Rs 110. Market Value of each share = Rs 110.
E17 A man has income of Rs 1,500 by investing in 15 % debentures of face value of Rs 100 and
available for Rs 104. If the brokerage is 1%, what is his investment?
S17 Refer Parts II and IV in Table 2
Investment Market Value (1 + % brokerage) Investment 104 (1 + 1%) .. E18 Investment Annual Income x 100 Dividend % x Face Value Investment = 100 x 104 x .
=
1,500 x 100 15 x 100
~
(lQ!_) 100
=
Rs 10,504.
Which is a better investment? (i) 15 % debentures at 8 % premium or, (ii) 14 % debentures at 4 % discount
1610
Quantitative
Aptitude
*
for Competitive
Examinations
S18 Simple method
Investment % Market Value (i) 15Xl08 (cross multiply) (Ii) 14 96 Hence, (i) 15 x 96 = 1,440 (ii) 14 x 108 = 1,520 :. (ii) > (i) .. (ll) investment is better. * This method is also applicable in case of share investment.
REGULAR PROBLEMS
(1) Find the purchase cost of (a) Rs 2,000, 4% stock at 5 discount (b) Rs 1,500,4% stock at 97 7 "8 1 and brokerage 8%·
1 1 (2) How much 4"2% stock at 97"2 can be purchased for Rs 390.
Hint: Amount of stock
=
Investment x 100 M.V. of one stock
(3) Rs 800 stock of a company costs Rs 750 including ~% brokerage. Find the market value of Rs 100 stock.
Hint: 800
750 ..
=
100 Cost price of stock
Cost price = 931
4
Market value = Cost price  brokerage.
=
93   
3 4
1 = 93 5 . 8 8
(brokerage
(4) Find the cash realised byselling Rs 4,000, 6 % stock at 5 premium
±
% ).
Hint: Sale Realisation
= Amount of stock x
(100 + Premium  brokerage) 100
(5) Find the cash required to purchase Rs 1,500, 4% stock at 105 (brokerage ~%). (6) Find the annual income derived from Rs 2,500, 4% stock at 100.
(7) Find the annual income by investing Rs 3,150, 4% stock at 105 .
Hint: Income = _±_ x 3,150.
105 (8) Find the annual income by investing Rs 9,550 in 4±% stock at 95 (brokerage ±% ).
[Refer Memory Table 1]
Hint:
Income Investment
Rate % of stock (Market value + brokerage)
Shares and Debentures (9) What rate % is obtained by investing in 9t % stock at 90 (brokerage % rate of stock Market value
1611
±
%).
Hint: Rate % obtained
(10)
=
+ brokerage
x 100.
Find the market value of a 8% stock in which an income of Rs 125 is derived by investing Rs 1,000, ( brokerage
±
%) .
(11)
What rate % is obtained if by investing Rs 1,000, one gets annual income of Rs 125.
Income Investment (12) What is the better investment? (i) 4 % stock at 95 or
Hint: Rate% obtained =
x 100.
(ii) 4±%
stock at 105 or 4 _!_ x 95
Hint: Test which is greater, 4 x 105
2
CD
(m
= 420 or 427.5 .. IT is greater than I So IT is better investment, also refer El8. (13) How much money must I invest in 7% stock at 105 to secure an annual income of Rs 400? (14) A man invests Rs 8,100 partly in 7% stock at 147 and partly in 6% stock at 144. If his income is same, fmd his two investments.
Hint: Since income from both investment is same, so, divide 8,100 in the ratio of 147 : 144.
7
6
(15)
Find the income derived from 600 shares, if the face value of one share is Rs 10 and dividend is 16%.
(16) A man sold 500 shares with face value Rs 100 and market value as Rs 740. How much did he gain if he had purchased the shares at 100% premium.
Hint: Gain = 500 (740  200). (17) A man purchased 300 shares of the face value of Rs 100 each from the market at Rs 800 per share. If a dividend of 24% is declared, find his earning per cent on the investment. Hint: % earning on investment
= % dividend
x
Face Value Market Value
%
800 (18) How many shares of market value of Rs 12.50 can be purchased for Rs 12,625, (if the brokerage is 1%).
= 24 x 100 = 3%.
1612
Quantitative Aptitude for Competitive Examinations
(19) A broker sold Rs 5,000 stock at 94% . If the brokerage is
i
% fmd the amount of brokerage and sale
proceeds of the stock holder. (20) A man invested Rs 3,300 when he bought Rs 100 shares at Rs 110. If 15% dividend is declared, find his annual income.
Hint: Refer Table 2. (21) A man invested Rs 12,000 in 11.5% debentures of face value Rs 100 and available market value is Rs 120. Find his annual income. Hint: See E.17. (22) Find the income per cent on 8% debenture of face value Rs 100 and available at Rs 80 each. (23) A man sold 20% debentures worth Rs 7,500 at 5% premium. Find the cash released from this sale, if brokerage is 2%. (24) A man buys 500 debentures of face value Rs 100 each at Rs 95 and sells the same when the price rises to Rs 98. If brokerage is 2% find his gain or loss. Hint: Purchase cost
= Market value,. (1 + % brokerage) Sell cost = Market value 2 (1  % brokerage) . . Gain/Loss per share = Purchase Cost  Sell Cost.
Answers 1. (a) Rs 1, 900 (b) 1, 470 1 10. 63.75 9. 10% 2 16. Rs 2,70,000 17. 3% 23. Rs 7,717.50 24.430 2 400 3. 93 ~ 8 4. Rs 4,190 5. 1,580 6. 100 7. 120 8. Rs 450
11. 12'!_ % 12. (ii) 13. Rs 6,000 14. Rs 3,780, Rs 4,320 15. Rs 960 2 18. 1,000 19. Rs 625, Rs 4,725 20. 450, 21. 1,150 22. 10
REAL PROBLEMS
(1) The cost of Rs S, p% stock at Rs M is MS (a) 100 (b) M S (c) ~ stock at 98, is (c) Rs 1,420 x 100
I
(d) ps
(2) The cost of Rs 1,500, 5 (a) Rs 1,550
±
M
(e)
ps 100
(b) Rs 1,470
(d) Rs 1,440
(e) Rs. 1,580 ( brokerage
(3) The cash required to purchase Rs 1,600, 5t% (a) Rs 1,656 (b) Rs 1,650
stock at 3± premium. (d) Rs 1,590
i
%) is
(c) Rs 1,662
(e) Rs 1,564
(4) The cash realised by selling Rs 2,500, 5% stock at 1l0i (a) Rs 2,600 (b) Rs 2,650 (c) Rs 2,750
(brokerage i% ) is (d) Rs 2,350
(RRB '84)
(5) The purchase price of a Rs 100 stock at 6 discount (a) Rs 100 (b) Rs 94.50 (c) Rs 106.5
(brokerage
1%)
(e) Rs 2,400 is (e) Rs 106
(d) Rs 94
Shares and Debentures (6) The income derived from a 6t% stock at 94 is (e) Rs 6.75
1613
(a) Rs 6 (b) Rs 6.50 (c) Rs 6.25 (d) Rs 5.80 (7) A 3% stock yields 4%. The market value of the stock is (a) 75 (b) 133 (c) 80 (d) 120 Hint: Market Value
(SSC, '88) (e) 104
= 1.
4
x 100
=
75, Refer Eq. (3).
(8) A 4t % stock should be purchased at what price to yield 5% interest? (a) Rs 80 (b) Rs 111 (c) Rs 90 (d) Rs 75 (e) Rs 110
(9) If a man earns Rs 270 by investing Rs 7,800 in 4t%
stock, brokerage being ~%, the market value (e) 1311 8 the amount of stock needed is (e) Rs 13,200
of stock is (a) Rs 130
(10)
(b) Rs 130~
(c) 1292 8
(d) 129~
To produce an annual income of Rs 600 in a 4t % stock at 94t (a) Rs 12,600 (b) Rs 13,000 (c) Rs 12,000
(d) Rs 10,000 brokerage = ~%.
(11) Find the rate % on investment, of a 4% stock at 79t,
(a) 4 %
(b)
5%
Hint: Rate % on investment
=
% rate of stock Market Value + brokerage stock at 90 or (ii) 4% stock at 88? (b) ii (d) None of these (UDC, '81)
(12) Which is better investment, (i) 4t% (a) i (c) Data insufficient
(13) The rate % obtained from 4% stock at 88 and from 4t % stock at M are equal. The value of M (purchase cost) is (a) 92 (b) · 88 M Hmt: 4 =(MBA, '85) 99 (c) 96 (d) 102 (e) 111
2 (14) If the annual income from 5% stock at 112 is Rs 42 more than 4% stock at 98, then the investment
IS
41
Re fier Eq. (3 ).
(a) Rs 12,000 Hint: Investment =
(b) Rs 11,000 Income difference
(c) Rs 10,976
(d) Rs 12,032
(e) Rs 11,048
C~2 9~)
Answers 1. (a) 10. (a)
2. (b) 11. (b)
3. (a) 12. (a)
4. (c) 13. (b)
5. (b)
14. (c)
6. (b)
7. (a)
8. (c)
9. (c)
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