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NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions

A listed company announces a bonus issue in the ratio 1:4 (one bonus share for every four held). An investor holds 2,000 shares before the record date. How many shares will the investor hold after the bonus allotment?

The investor will hold 2,500 shares. A 1:4 bonus gives one additional share for every four held, so 2,000 shares earn 500 bonus shares, taking the holding to 2,500 after allotment.

  1. A2,500Correct
  2. B2,400
  3. C2,250
  4. D3,000

Explanation

A 1:4 bonus means 1 new share for every 4 held. 2,000 / 4 = 500 bonus shares, so the total is 2,000 + 500 = 2,500. The figure 2,400 wrongly treats the ratio as 1:5, and 3,000 wrongly treats it as 1:2.

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