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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)

A company declares a bonus issue in the ratio 1:2 (one bonus share for every two held). An investor holds 1,000 shares. How many shares will the investor hold after the bonus issue, ignoring any fractions?

The investor will hold 1,500 shares. A 1:2 bonus gives one new share for every two held, so 1,000 shares earn 500 bonus shares, which added to the original holding gives 1,500 shares in total.

  1. A1,200 shares
  2. B1,500 sharesCorrect
  3. C2,000 shares
  4. D3,000 shares

Explanation

A 1:2 bonus means 1 new share for every 2 held. 1,000 / 2 = 500 bonus shares, so the total holding becomes 1,000 + 500 = 1,500. The 1,200 figure wrongly treats the ratio as 1 for 5, and 2,000 treats it as 1:1.

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