Mr Sharma has 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, quoted at 4% discount, paying 18% dividend annually. Calculate his annual dividend from these shares.
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : ₹1800
Nominal value of 1 share = ₹100
Mr Sharma sold the shares at 60% premium
S.P of 1 share = $₹100 + ₹60 = ₹160$
∴S.P of 60 shares $=₹160×60= ₹9600$
Market value of ₹50 share $=₹50\left(1-\frac{4}{100}\right)$ $= ₹48$
No. of shares purchased by Mr. Sharma $=\frac{₹9600}{₹48}$ $= 200$
Dividend on 1 share of $₹50 =₹\left(\frac{18}{100}×50\right)$ $=₹9$
∴ Annual dividend from 200 shares $= ₹(9×200)$ $= ₹1800$