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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 - ICSE Class 10 - Mathematics

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

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Solution 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 Concept: Shares and Dividends.
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