Question

Mr. Sharma buys 60 shares of nominal value of Rs 100 and he decides to sell them when they are at a premium of $60\%$. He invests the proceeds in shares of nominal value of Rs 50, quotes at $4\%$ discount, paying $18\%$ dividend annually. Calculate:
(i) the sale proceeds,
(ii) the number of shares he buys and
(iii) the annual dividend from these shares
[3 MARKS]

Answer 1

Each subpart: 1 Mark each

(i) Nominal value of 60 shares = Rs 100 $\times$ 60 = Rs 6,000
$\therefore$ The sale proceeds = Rs 6000 + $60\%$ of Rs 6,000
= Rs 6000 + Rs $\frac{60\times 6000}{100}$ = Rs 6000 + Rs 3600 = Rs 9600
(ii) Discount on each share = $4\%$ of Rs 50 = Rs 2
$\therefore$ market value of each share = Rs 48
So, number of shares bought = $\frac{9600}{48}=200$
(iii) Total face value = Rs 50 $\times$ 200 = Rs 10,000
Annual dividend = $18\%$ of Rs 10,000 = Rs $\frac{18}{100}\times 10,000$ = Rs 1800