How to Solve Stocks and Shares Aptitude Problems
Solve stocks and shares aptitude problems with face value, market value and dividend, plus a worked example and practice questions.
Expected Interview Answer
Stocks and shares problems separate face value (the printed denomination), market value (the price actually paid), and dividend (a percentage of face value, not market value), and every calculation must use the correct one of the three.
Dividend income is always face value times dividend rate divided by 100, regardless of what price was paid for the share — this is the single most tested trap, since dividend never uses market value. The number of shares bought equals the investment divided by the market value per share, and total dividend received equals that share count times per-share dividend. Yield, or the effective rate of return, is annual dividend divided by market value (not face value) times 100, which is why a stock trading below face value ("at a discount") gives a higher yield than its stated dividend rate. Working problems in this fixed order — shares bought, dividend per share, total dividend, then yield — avoids mixing up which value belongs where.
- Three-value framework (face, market, dividend) prevents the most common mix-up
- Fixed calculation order avoids using the wrong value at each step
- Explains why yield differs from the stated dividend rate
AI Mentor Explanation
A player’s printed base contract value (face value) is fixed on paper, but what a franchise actually pays to acquire that contract at an auction (market value) can be higher or lower depending on demand. The player’s guaranteed bonus clause always pays a percentage of the printed base contract, never of the auction price paid — exactly like a dividend, which is always a percentage of face value, never of market value. A franchise that acquires the contract below its printed value effectively earns a higher bonus yield relative to what it actually spent, the same reason discounted stocks yield more than their stated rate.
Worked example (yield on a discounted stock)
Dividend per share
- Face 100 × 9% = 9
Market value paid
- 90 (at a discount)
Yield
- 9/90 × 100 = 10%
Step-by-Step Explanation
Step 1
Identify face value and dividend rate
Dividend per share = Face Value × Rate / 100, never using market value.
Step 2
Identify market value
Market value is the actual price paid or received per share.
Step 3
Compute shares bought
Number of shares = Total Investment ÷ Market Value.
Step 4
Compute yield
Yield = (Annual Dividend ÷ Market Value) × 100 — always uses market value, not face value.
What Interviewer Expects
- Clear separation of face value, market value, and dividend rate
- Correct use of face value (never market value) to compute dividend
- Correct use of market value (never face value) to compute yield
- Understanding why discount/premium pricing changes yield versus stated rate
Common Mistakes
- Computing dividend using market value instead of face value
- Computing yield using face value instead of market value
- Confusing “at a discount” and “at a premium” when comparing market value to face value
- Mixing up total investment with total face value of shares owned
Best Answer (HR Friendly)
“I keep three numbers strictly separate: face value, which is the printed denomination; market value, which is what you actually pay or receive; and dividend, which is always a percentage of face value, never market value. Once those are separated, shares bought is investment over market value, and yield is annual dividend over market value — that is also why a stock bought below face value always yields more than its stated rate.”
Follow-up Questions
- Why does a stock trading at a discount always have a yield higher than its stated rate?
- How do you compute total income from a stock investment given the investment amount and rate?
- How does brokerage or transaction cost affect the effective market value?
- How would you compare two stocks with different face values and dividend rates by yield alone?
MCQ Practice
1. A 100 face-value stock pays an 8% dividend and is bought at 80. The dividend per share is?
Dividend is always face value × rate / 100 = 100×8/100 = 8, regardless of market value.
2. A stock is bought below its face value (at a discount). Its yield compared to its stated dividend rate is?
Yield = dividend/market value × 100; a smaller market value in the denominator raises the yield above the stated rate.
3. An investor spends 4500 buying shares of market value 90 each. How many shares are bought?
Shares bought = Investment ÷ Market Value = 4500 ÷ 90 = 50.
Flash Cards
Dividend per share formula? — Face Value × Dividend Rate / 100 — never market value.
Yield formula? — (Annual Dividend ÷ Market Value) × 100.
Shares bought formula? — Total Investment ÷ Market Value per share.
Why does a discounted stock yield more than its stated rate? — Yield divides by a smaller market value, raising the ratio above the face-value-based rate.