#### Question

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

1) the sale proceeds

2) the number of shares he buys and

3) his annual dividend from the shares.

#### Solution

1st case

Nominal value of 1 share = Rs 100

Nominal value of 60 shares = Rs 100 × 60= Rs 6,000

Market value of 1 share = Rs 100 + 60% of Rs 100

= Rs 100+ Rs 60 = Rs 160

Market value of 60 shares = Rs 160 × 60 = Rs 9,600

2) Nominal value of 1 share = Rs 50

Market value of 1 share= Rs 50 – 4% of Rs 50

= Rs 50 - Rs 2 = Rs 48

No of shares purchased = `9600/48 = 200` shares

3) Nominal value of 200 shares = Rs 50 × 200 = Rs 10,000

Dividend% = 18%

Dividend = 18% of Rs 10,000

`= 18/100 xx 10000 = "Rs" 1800`