Stocks & Shares Questions and Answers

Answer: B

The dividend is a percentage of the face value.

\[ \text{income} = 12.5\% \text{ of } 50 = \text{Rs. } 6.25 \]

The investor wants that to be 25% of what was paid:

\[ \text{price} = \frac{6.25}{0.25} = \text{Rs. } 25 \]

Dividend is reckoned on face value, yield on market value - keeping the two apart is the whole of this topic.

Answer: B

In stock problems, a "\( r\% \) stock at \( m \)" means Rs. 100 of face value costs Rs. \( m \) and pays Rs. \( r \) a year, so the yield on money invested is \( \tfrac{r}{m} \).

\[ \text{yield} = \frac{10}{96} \]

\[ \text{investment} = 650 \times \frac{96}{10} = \text{Rs. } 6240 \]

Each Rs. 96 invested returns Rs. 10, so the investment is the income scaled by \( \tfrac{96}{10} \).

Answer: A

In stock problems, a "\( r\% \) stock at \( m \)" means Rs. 100 of face value costs Rs. \( m \) and pays Rs. \( r \) a year, so the yield on money invested is \( \tfrac{r}{m} \).

\[ \text{12\% at 120 yields } 10\%, \qquad \text{15\% at 125 yields } 12\% \]

\[ 0.10x + 0.12(12000 - x) = 1360 \]

\[ 0.10x + 1440 - 0.12x = 1360 \quad\Longrightarrow\quad -0.02x = -80 \]

\[ x = \text{Rs. } 4000 \]

Checking: Rs. 400 from the first stock and Rs. 960 from the Rs. 8000 in the second.

Answer: B

Rs. 1552 invested at Rs. 97 per Rs. 100 of face value buys

\[ \frac{1552}{97} \times 100 = \text{Rs. } 1600 \text{ of stock} \]

\[ \text{dividend rate} = \frac{128}{1600} = 8\% \]

The dividend is a percentage of the Rs. 1600 face value, not of the Rs. 1552 invested - that would give 8.25%.

Answer: B

\[ \text{yield} = \frac{135}{1620} = \frac{1}{12} = 8.33\% \]

\[ \text{market value} = \frac{8}{1/12} = \text{Rs. } 96 \]

Equivalently, Rs. 1620 buys \( \tfrac{135}{8} \times 100 = 1687.5 \) of face value, and \( \tfrac{1620}{1687.5} \times 100 = 96 \).

Answer: B

In stock problems, a "\( r\% \) stock at \( m \)" means Rs. 100 of face value costs Rs. \( m \) and pays Rs. \( r \) a year, so the yield on money invested is \( \tfrac{r}{m} \).

\[ \text{yield} = \frac{6}{m} = 8\% \]

\[ m = \frac{6}{0.08} = \text{Rs. } 75 \]

A yield above the dividend rate means the stock trades below par.

Answer: B

Correct answer: Rs. 5700

The quotation of 95 means each Rs. 100 of stock costs Rs. 95.

\[\text{Cost} = \frac{6000}{100} \times 95 = \text{Rs. } 5700\]

The 5% rate does not enter the purchase price at all; it governs only the income the stock will pay.

Answer: B

In stock problems, a "\( r\% \) stock at \( m \)" means Rs. 100 of face value costs Rs. \( m \) and pays Rs. \( r \) a year, so the yield on money invested is \( \tfrac{r}{m} \).

\[ \text{yield} = \frac{6}{m} = 8\% \]

\[ m = \frac{6}{0.08} = \text{Rs. } 75 \]

A yield above the dividend rate means the stock trades below par.

Answer: B

Given market value = Rs 96
Required income = Rs 650
We assume the face value to be Rs 100.
To obtain 10% of face value, investment had to be Rs 96. So, in order to receive Rs 650, required investment is:
9.6*650=6240
Thus the investment should be Rs 6240.

Answer: D

In stock problems, a "\( r\% \) stock at \( m \)" means Rs. 100 of face value costs Rs. \( m \) and pays Rs. \( r \) a year, so the yield on money invested is \( \tfrac{r}{m} \).

\[ \frac{12}{m} = 10\% \quad\Longrightarrow\quad m = \frac{12}{0.10} = \text{Rs. } 120 \]

A yield below the dividend rate means the stock trades above par - which rules out the Rs. 83.33 option at once.