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 a discount of Rs 10 and remaining shares were sold at a premium of ` 75. For each trade he paid the brokerage of Rs 20. Find whether 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

∴ Amount invested = Cost of each share × Number of shares purchased = Rs 150 × 200 = Rs 30,000

Total dividend received = Number of shares purchased × Dividend received on each share = 200 × $\left(\frac{50}{100}\times 50\right)$ = Rs 5,000

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

∴ Selling price of 100 shares at discount of Rs 10 = Rs 40 × 100 = Rs 4,000

Selling price of each share at premium of Rs 75 = Rs 50 + Rs 75 = Rs 125

∴ Selling price of 100 shares at premium of Rs 75 = Rs 125 × 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

∴ Total brokerage paid on 3 trades = Rs 20 × 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 loss of Rs 8,560.