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

1. Find the dividend received on 80 shares of Rs 25 each if 9% dividend is declared.
2. A company declares semi-annual dividend of 6%. A man has 700 shares of printed value Rs 12·50 each. Find his annual income.
3. 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.
4. 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.
5. Find the market price of 5% share when a person gets Rs 175 by investing Rs 3850.
6. 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.
7. 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.
8. 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%?
9. 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.
10. At what price should a 6·25% Rs 100 share be quoted when the money is worth 5%?
11. At what price should a 6·25% Rs 50 share be quoted when the money is worth 10%?
12. 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?
13. 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.
14. 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.
15. Which is better investment: 7% at Rs 116 or 9% at Rs 145?
16. Which is more profitable investment: 4% Rs 100 share at Rs 120 or 3·5% ten-rupee share at Rs 9?
17. 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?
18. 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.
19. 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.
20. 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