Business Mathematics and Statistics · Ch 7 — Financial Mathematics (Annuities; Stocks, Shares, Debentures and Brokerage)
Stocks and Shares — Basic Terms
Stocks and Shares — Basic Terms
The second half of this chapter shifts from savings/loan mathematics to the mathematics of investing in a company's securities. When a joint-stock company needs capital, it divides its total capital requirement into small, equal units called shares, and sells these to the investing public.
Core Terms
- Face Value (Nominal Value / Par Value): the value printed on the share certificate itself, fixed when the share is first issued (commonly ₹10 or ₹100), and never changing thereafter.
- Market Value: the price at which the share actually trades on the stock exchange on a given day — determined by demand and supply, and almost always different from the face value. A share trading above its face value is said to be at a premium; below face value, at a discount; and exactly equal to it, at par.
- Dividend: the portion of a company's profit distributed to shareholders, always declared and paid as a percentage of the face value, never of the market value — this single fact is the reason face value, not market value, is used throughout every dividend-income calculation in this chapter.
Annual Income from a Shareholding
Annual Income=Number of Shares×Face Value×100Rate of Dividend …
The fixed value printed on a share certificate at the time of issue; never changes over the l …
The price at which a share actually trades on the stock exchange; can be at par, at a premium (above face value), or at a disco …
A company's profit distributed to shareholders, always declared and paid as a percentage of the share's face value, ne …