Question

Mr.D'souza purchased 200 shares of FV Rs 50 at a premium of Rs 100.He received 50 % dividend on the shares. After receiving the dividend he sold 100 shares at discount of Rs 10 and remaining shares were sold at a premium of Rs 75. For each trade he paid the brokerage of Rs 20. Find weather Mr.D'souza gained or incurred a loss ? by how much ?

Answer 1

Cost (or MV) of each share = FV of each share + Premium = Rs $50$ + Rs $100$ = Rs $150$

Number of shares purchased = $200$

$\therefore$ Amount invested = Cost of each share \times Number of shares purchased

= Rs $150\times 200$ = Rs $30,000$

total dividend received = Number of shares purchased \times Dividend received on each share

= $200\times (\frac{50}{100}\times 50)$ = Rs $5,000$

Selling price of each share at discount of Rs $10$ = Rs $50$ - Rs $10$ = Rs $40$

Selling price of 100 share at discount of $Rs10=Rs.40\times 100=4000$

$\therefore$ Selling price of each share at premium of Rs $75$ = Rs $50$ + Rs $75$ = rs $125$

$\therefore$ Selling price of $100$ shares at premium of Rs $75$ = Rs $125\times 100$ = Rs $12,500$

Total money received on selling $200$ shares = Rs $4,000$ + Rs $12,500$ = Rs $16,500$

Brokerage paid on each trade = rs $20$

$\therefore$ Total brokerage paid on $3$ trades,

= Rs $20\times 3$ = Rs $60$

Net income of Mr. D'souza = Total money received on selling $200$ shares + Total dividend received - Total brokerage paid on $3$ trades

= Rs $16,500$ + Rs $5,000$ - Rs $60$

= Rs $21,440$

Since net income of Mr. D'souza is less than the amount invested so Mr. D'souza incurred a loss.

Loss incurred = amount invested - Net income of Mr. D'souza

= Rs $30,000$ - Rs $21,440$ = Rs $8,560$.

Thus, Mr. D'souza incurred a loss of Rs $8,560$.