Question

Mr. Sharma has 60 shares of nominal value of ₹ 100 and he decides to sell them when they are a premium of 60 %. He invests the proceeds in shares of nominal value ₹ 50, quoted at 4 % discount, paying 18% dividend annually. Calculate :

(i) the sale proceeds

(ii) the number of shares he buys

(iii) his annual dividend from these shares

• A. i) 9800 (ii) 200 (iii) ₹ 1700
• B. i) ₹ 9600 (ii) 200 (iii) ₹ 1800
• C. i) ₹ 9500 (ii) 150 (iii) ₹ 18
• D. i) ₹ 9000 (ii) 100 (iii) ₹ 900

Answer 1

The correct option is B

i) ₹ 9600 (ii) 200 (iii) ₹ 1800

Given that the Number of shares bought = 60
N.V of each share = ₹ 100
M.V of each share = 60 % Premium
= ₹ 160

Hence the sale proceed = 60 x 160
= ₹ 9600

ii) The N.V of the new share = ₹ 50
M.V of the new share = 4 % discount
= ₹ 48

Hence number of shares bought = $\frac{9600}{48}$
= 200

iii) Given that the dividend = 18 %
Hence the dividend on one share = $\frac{18}{100}$ $\times$ 50
= ₹ 9

Annual Income = Number of shares bought x dividend on one share
= 200 x ₹ 9
= ₹ 1800