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Question
Mr. D'souza purchased 200 shares of FV ₹ 50 at a premium of ₹ 100. He received 50% dividend on the shares. After receiving the dividend he sold 100 shares at a discount of ₹ 10 and remaining shares were sold at a premium of ₹ 75. For each trade he paid the brokerage of ₹ 20. Find whether Mr. D'souza gained or incurred a loss? by how much?
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Solution
Number of shares purchased = 200 shares
FV of the share = ₹ 50
premium = ₹ 100
Rate of the dividend = 50%
Brokerage = ₹ 20
Cost (or MV) of each share = FV of each share + Premium
= ₹ 50 + ₹ 100
= ₹ 150
∴ Amount invested = Cost of each share × Number of shares purchased
= ₹ 150 × 200
= ₹ 30,000
Total investment = sum invested + brokerage
= ₹ 30,000 + 20
= ₹ 30,020
Total Dividend received = Number of shares purchased × Dividend received on each share
= 200 × \[\left( \frac{50}{100} \times 50 \right)\]
= ₹ 5,000
Shares is at discount = 10%
Market value = FV - Discount
= ₹ 50 - 10
= ₹ 40
The selling price of the share = No. of shares × Market value
= ₹ 40 × 100
= ₹ 4,000
The amount received after selling 100 shares = selling price of the share - Brokerage
= ₹ 4,000 - 20
= ₹ 3,980
Case II:
Remaining shares = 100
Shares is at premium = ₹ 75
FV of the shares = ₹ 50
MV of the shares = FV + Premium
= ₹ 50 + ₹ 75
= ₹ 125
∴ Selling price of 100 shares at a premium of ₹ 75
= ₹ 125 × 100
= ₹ 12,500
The amount received after selling 100 shared = selling price of the share - Brokerage
= ₹ 12,500 - ₹ 20
= ₹ 12,480
The total amount Mr Dssouza received = Dividend + Amount received by the case (II) + Amount received by the case (II)
= ₹ 5,000 + ₹ 3,980 + ₹ 12,480
= ₹ 21, 460
Total Investment Mr. D'souza = ₹ 30,020
Total investment is less than the total amount received
∴ Loss = Total Investment - Amount received
= ₹ 30,020 - ₹ 21,460
= ₹ 8,560
Thus, Mr. D'souza incurred a loss of ₹ 8,560.
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