Question

What is the value of a security? What is the price of a security? How are security

value and price linked with each other?

PLEASE ANSWER THIS IN AN ESSAY FORMAT!

Answer 1

For any one who has invested tiny bucks in stock market will know clearly that there is a difference in the value of the Security and the price of the Security at which it is traded in the market. Security is a financial instrument , in which the investor invests his money to earn considerable amount of profit. Security are categorised into 3 kinds

.

1) Debt Securities (such as Bonds,Debentures etc)

2)Equity Securities and Preference Securities( no longer traded)

3)Derivatives( Such as futures,forward,options and swaps).Derivatives are considered highly risky assets out of all.

Value of the Securities

Value of the Security is the intrinsic value of the security. Investor finds out the value through secondary sources of data, such as published newspaper , Business Channels, Online websites such as moneycontrol.com and what is its earning capacity in the past,present and in future. It is what the investor thinks should be traded in the market. We see many business experts also quotes values on business channels for the investor to know its value.

Stock Price : upon many factors such as

Stock price is the price which the stocks are traded in the market. It is also called as market price.Most recent price which is traded on the exchange.We can see the prices of the stocks being displayed on the business channels or apps, through which the buyer gets to know the price at which he can buy from the seller.The short term price of the share is highly dependent upon market supply and demand.

Relation between Value and the Stock price:

Traders influence to a great extent on stock price. Intra day traders are the ones who decide majorly the prices to be traded in the market. Whereas value creators are the ones who invest for long term in the company  creating the actual value to the company.But long term investors need to follow the stocks on a regular basis to get the best deal on the investment made.