# Shares and Debentures

- The original value of a share is called its
**nominal value**or**face value**or**printed value.** - The price of a share at any time is called its
**market value**or**cash value.** - If the market value of a share is the same as its nominal value, the share is called
**at par.** - If the market value of a share is more than its nominal value, the share is called
**at premium**or**above par.** - If the market value of a share is less than its nominal value, the share is called
**at discount**or**below par.** - The profit which a shareholder gets for his investment from the company, is called
**dividend.** - The dividend is always expressed as the percentage of the face value of the share.
- The dividend is always given (by the company) on the face value of the share irrespective of the market value of the share.

## Exercise

- Find the dividend received on 80 shares of Rs 25 each if 9% dividend is declared.
- A company declares semi-annual dividend of 6%. A man has 700 shares of printed value Rs 12·50 each. Find his annual income.
- A company declares 9% dividend to the shareholders. If a man receives Rs 540 as his dividend, find the number of twenty-five rupee shares he possesses.
- A man bought 600 shares, each of face value Rs 50, of a certain company, and received Rs 2400 as dividend. Find the rate of dividend.
- Find the market price of 5% share when a person gets Rs 175 by investing Rs 3850.
- Mr. Mukerji invested Rs 6700 in shares of a company paying 14% dividend. If he bought Rs 25 share for Rs 33·50 each, find his annual income from his investment.
- A man invests Rs 1680 in buying shares of nominal value Rs 24 and selling at
12% premium. The dividend on the shares is 15% per annum.

(i) Calculate the number of shares he buys.

(ii) Calculate the dividend he receives annually. - How much should a man invest in Rs 25 shares selling at Rs 45 to obtain an income of Rs 390, if the dividend declared is 12%?
- A man invests Rs 6250 in shares of a company which pays 18% dividend when the market value of a Rs 25 share is Rs 31·25. Find his net income after paying 30% income tax.
- At what price should a 6·25% Rs 100 share be quoted when the money is worth 5%?
- At what price should a 6·25% Rs 50 share be quoted when the money is worth 10%?
- A man invests Rs 6400 in a company paying 9% dividend when a share of
printed value of Rs 100 is selling at Rs 60 premium.

(i) What is his annual income?

(ii) What percent does he get on his money? - A man invests a sum of money in Rs 100 shares, paying 15% dividend
quoted at 20% premium. If his annual dividend is Rs 540, calculate

(i) his investment

(ii) the rate of return on his investment. - 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 Rs 50,
quoted at 4% discount, paying18% dividend annually. Calculate

(i) the sale proceeds

(ii) the number of shares he buys

(iii) his annual dividend from these shares. - Which is better investment: 7% at Rs 116 or 9% at Rs 145?
- Which is more profitable investment: 4% Rs 100 share at Rs 120 or 3·5% ten-rupee share at Rs 9?
- A man has a choice to invest in hundred-rupee shares of two firms at Rs 120 each or at Rs 132 each. The first firm pays a dividend of 5% per annum and the second firm pays 6% per annum. How much more will his annual return be if he invests Rs 26400 with the firm from which he gets a better return on his investment?
- A man bought 360 ten-rupee shares paying 12% p.a. He sold them when the price rose to Rs 21 and invested the proceeds in five-rupee shares paying 4½% p.a. at Rs 3·50 per share. Find the annual change in his income.
- Mr. Ravi invests Rs 40000 in 10% Rs 100 shares at 25% premium. Find his annual income if the income tax is deducted at the rate of 20%. Later on, he sells half the shares at Rs 140 and invests the sale value in 15% Rs 10 shares available at 20% discount. Find the change in his annual income, if the income tax is deducted at the same rate.
- Mr. Singh invested Rs 8000 in 7% (Rs 100) shares at Rs 80. After a year
he sold these shares at Rs 75 each and invested the proceeds in 15% (Rs 25) shares at Rs 41 each. Find

(i) his gain or loss after a year

(ii) his income from the second investment

(iii) the percentage of increase in return on his original investment.

[**Hint.**Amount received after a year = dividend on the investment of Rs 8000 +the sale value of the shares]

## Answers

**1.**Rs 180

**2.**Rs 1050

**3.**2400

**4.**8%

**5.**Rs 110

**6.**Rs 700

**7.**(i) 62·5 (ii) Rs 225

**8.**Rs 5850

**9.**Rs 630

**10.**Rs 125

**11.**Rs 31·25

**12.**(i) Rs 360 (ii) %

**13.**(i) Rs 4320 (ii) 12·5%

**14.**(i) Rs 9600 (ii) 200 (iii) Rs 1800

**15.**9% at Rs 145

**16.**3·5% ten-rupee share at Rs 9

**17.**Rs 100

**18.**Gain Rs 54

**19.**Rs 2560; Rs 2080

**20.**(i) Gain Rs 200 (ii) Rs 750 (iii) 5/8%