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**1. Introduction**

To start a big business or an industry, a large amount of money is required. This may be beyond the capacity of one or two individuals. Hence, a number of individuals join hands to form a company called Joint Stock Company.

The total amount of money required by the company is called the stock Capital.

The company issues share certificates to each of its shareholders indicating the number of shares allocated and the value of each share.

The face value of a share always remains the same.

The market value (trading price) of a share can vary time to time.

Let's consider an example . Assume that the face value of a company X is Rs.10 and it is now traded at a premium of Rs.2. Then its market value now is (Rs.10 + Rs.2) = Rs.12.

Similarly, if the company X having face value of Rs.10 is now traded at a discount of Rs.2, it means the market value of X now is (Rs.10 – Rs.2) is Rs.8

Dividends are declared annually, semi-annually and quarterly as per the company regulations.

Dividend on a share is normally expressed as a certain percentage of its face value. Sometimes, it is also expressed as a certain amount per share.

Brokerage is added to the cost price when the stock is purchased.

Brokerage is subtracted from the selling price when the stock is sold

= Total Income/Income from one share

= Total Face Value/Face value of 1 share

It means,

The face value of the stock = Rs.100Market value (MV) of the stock = Rs.110

Annual dividend per share = 8% of the face value = (100×8)/100 = Rs.8

Ie, here , an investment of Rs.110 gives an annual income of Rs.8

Rate of interest per annum = Annual income from an investment of Rs.100 = 8×100/110 = 7.27%

Please note that generally investors invest in shares not merely because of this annual return. They also will have a capital gain if the market value the share goes higher.

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