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WAEC Commerce 2014 Question 25

Question 25

Stock Exchange

Use the following information: Olumide bought shares in a company with the following information: Authorized capital ₦500,000; Issued capital ₦450,000; Nominal value ₦1.00; Market price ₦1.20.
If the shares are offered to him at ₦1.15, the share is sold at

  1. A.par value.
  2. B.a discount
  3. C.face value.
  4. D.a premium.
Show the answer and explanation

Answer: D (a premium.)

Explanation

₦1.15 is above the nominal value of ₦1.00, so the share is sold at a premium.