Question

A bonus issue of ordering shares on the basis of three new shares for every five held has been made by a company. What will be the increase in the number of shares of an investor who originally had 75,000 ordinary shares?

a) 30,000 shares
b) 45,000 shares
c) 50,000 shares
d) 60,000 shares

Answer 1

To find the increase in shares after a bonus issue, divide the total number of existing shares by the ratio of existing shares and multiply by the ratio of new shares. For 75,000 existing shares with a bonus issue of three new shares for every five held, the investor receives 45,000 new shares.

Step-by-step explanation:

The student has asked about the increase in the number of shares an investor would have after a company makes a bonus issue of shares. In this scenario, the company is issuing three new shares for every five shares held. If the investor originally had 75,000 ordinary shares, the calculation to determine the increase will be as follows:

• Determine the ratio of new shares to existing shares, which is 3 new shares for every 5 existing shares.
• Calculate the number of new shares that will be received by dividing the existing shares by the existing share portion of the ratio and then multiplying by the new share portion of the ratio. So, (75,000 / 5) x 3 = 15,000 x 3 = 45,000 new shares.

The investor will receive an increase of 45,000 shares, making option b) 45,000 shares the correct answer.