Shares and Dividends • Topic 3 of 3

Buying and Selling Value

What is buying and selling value of shares? When you buy or sell shares, you pay or receive money based on the market value at that time. However, there are additional costs and factors to consider.

Important terms:

Term	Meaning
Brokerage	Fee paid to the broker for buying/selling shares (usually a percentage)
Total Investment	(Number of shares × Market Value) + Brokerage
Selling Proceeds	(Number of shares × Market Value) − Brokerage
Profit/Loss	Selling proceeds − Total investment
Nominal Value	Same as Face Value

Buying shares formula: Total cost = (Number of shares × Buying price) + Brokerage

Selling shares formula: Total received = (Number of shares × Selling price) − Brokerage

Net profit = Total received − Total cost

Real-life analogy: Buying a share is like buying a used car. You pay the price of the car (market value) plus registration and dealer fees (brokerage). When you sell, you get the selling price minus dealer fees again. Your profit is what's left after all costs!

┌─────────────────────────────────────────────────────────────┐
│           BUYING AND SELLING VALUE - COMPLETE CYCLE          │
└─────────────────────────────────────────────────────────────┘

BUYING SHARES:

    Market Price per share = ₹100
    Number of shares = 200
    Brokerage = 1%
    
    Total Market Value = 200 × 100 = ₹20,000
    Brokerage = 1% of ₹20,000 = ₹200
    ─────────────────────────────────────
    TOTAL INVESTMENT = ₹20,200


SELLING SHARES (at higher price):

    Selling Price per share = ₹120
    Number of shares = 200
    Brokerage = 1%
    
    Total Market Value = 200 × 120 = ₹24,000
    Brokerage = 1% of ₹24,000 = ₹240
    ─────────────────────────────────────
    TOTAL RECEIVED = ₹23,760


PROFIT CALCULATION:

    Total Received = ₹23,760
    Total Investment = ₹20,200
    ─────────────────────────
    NET PROFIT = ₹3,560


VISUAL TIMELINE:

    ┌──────────┐     ┌──────────┐     ┌──────────┐
    │   BUY    │ ──► │   HOLD   │ ──► │   SELL   │
    └──────────┘     └──────────┘     └──────────┘
         │                 │                 │
         ▼                 ▼                 ▼
    Pay: MV +       Wait for        Receive: MV -
    Brokerage       price rise      Brokerage
    
         │                 │                 │
         └─────────────────┴─────────────────┘
                         │
                         ▼
                  PROFIT or LOSS


RETURN CALCULATION SUMMARY TABLE:

┌──────────────────┬──────────────────────────────────────┐
│     Scenario      │         Calculation                 │
├──────────────────┼──────────────────────────────────────┤
│ Buying Cost      │ (Shares × Buy Price) + Brokerage     │
│ Selling Proceeds │ (Shares × Sell Price) − Brokerage    │
│ Profit           │ Selling Proceeds − Buying Cost       │
│ Loss             │ Buying Cost − Selling Proceeds       │
│ ROI (with profit)│ (Profit ÷ Buying Cost) × 100%        │
└──────────────────┴──────────────────────────────────────┘

Solved Examples

Worked Example

Raj buys 500 shares of a company at ₹45 per share. The brokerage is 2%. Find his total investment.

Solution

Step 1: Market value of shares = 500 × 45 = ₹22,500
Step 2: Brokerage = 2% of ₹22,500 = (2/100) × 22,500 = ₹450
Step 3: Total investment = ₹22,500 + ₹450 = ₹22,950

Answer: ₹22,950

Worked Example

Priya sells 300 shares at ₹80 per share. She pays 1.5% brokerage. How much does she receive?

Solution

Step 1: Market value of shares = 300 × 80 = ₹24,000
Step 2: Brokerage = 1.5% of ₹24,000 = (1.5/100) × 24,000 = ₹360
Step 3: Amount received = ₹24,000 − ₹360 = ₹23,640

Answer: ₹23,640

Worked Example

Amit bought 400 shares at ₹120 each (brokerage 1%) and sold them later at ₹150 each (brokerage 1%). Find his net profit.

Solution

Step 1: Buying cost = (400 × 120) + 1% of (400 × 120) = 48,000 + 480 = ₹48,480
Step 2: Selling proceeds = (400 × 150) − 1% of (400 × 150) = 60,000 − 600 = ₹59,400
Step 3: Net profit = ₹59,400 − ₹48,480 = ₹10,920

Answer: ₹10,920

Key Points

Buying cost = (Shares × Buying price) + Brokerage
Selling proceeds = (Shares × Selling price) − Brokerage
Brokerage is usually a percentage of the total market value
Net profit = Selling proceeds − Buying cost
If selling proceeds < buying cost, it's a loss
Always calculate brokerage on the total market value, not per share

Quick Check — 4 MCQs

Tap an option to check your answer0 / 4

Q1.The amount invested in shares equals:

Explanation: Shares times their buying price.

Q2.Profit on selling shares equals:

Explanation: Sale minus cost.

Q3.If bought at $\textsf{Rs }120$ and sold at $\textsf{Rs }150$, the gain per share is:

Explanation: $150-120=30$.

Q4.Sale proceeds $=$ number of shares $\times$:

Explanation: Selling price.

Practice more MCQs → 📝 Assignment · 35 marks