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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Operational Aspects of Investment Management

Mr. Rao buys 200 shares of an Indian company at Rs 500 each on a delivery basis. Brokerage and other charges total Rs 1,000 and are added to his cost. A few months later he sells all 200 shares at Rs 560 each, with total sale charges of Rs 1,000 deducted from proceeds. What is his net profit before tax?

The net profit is Rs 10,000. Purchase cost with charges is Rs 101,000, and sale proceeds net of charges are Rs 111,000. The difference is Rs 10,000, since both buying and selling charges must be accounted for in the calculation.

  1. ARs 12,000
  2. BRs 10,000Correct
  3. CRs 11,000
  4. DRs 9,000

Explanation

Cost = 200 x 500 + 1,000 = Rs 101,000. Net proceeds = 200 x 560 - 1,000 = Rs 111,000. Profit = 111,000 - 101,000 = Rs 10,000. Rs 12,000 ignores both charges, Rs 11,000 ignores only one set, and Rs 9,000 double counts charges.

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