Find the cost price of Rs 4500 nominal value of 8.5 percent stock purchased at 4 percent premium in the market.

Introduction / Context: This question checks your understanding of how to calculate the market cost of buying a given nominal amount of stock when the stock is quoted at a premium. In stock and share problems, nominal value, premium or discount, and percentage dividend are standard concepts, but here we focus only on the cost of purchase when the market price is above face value. Given Data / Assumptions:

• Nominal value of stock required = Rs 4500
• Stock pays 8.5 percent dividend (not directly used in this cost calculation)
• Stock is purchased at 4 percent premium
• Face value (nominal value) is assumed to be Rs 100 per share unless otherwise stated

Concept / Approach: When a stock is at 4 percent premium, it means a Rs 100 nominal share costs Rs 104 in the market. The cost of any given nominal value is found by scaling this price. Formula: Cost price = Nominal value * (Market price per 100 nominal / 100). So we multiply the total nominal value by 104 and divide by 100. Step-by-Step Solution: Step 1: Market price of Rs 100 nominal stock at 4 percent premium = Rs 104. Step 2: Total nominal value required = Rs 4500. Step 3: Cost price = 4500 * 104 / 100. Step 4: Simplify: 4500 * 104 / 100 = 45 * 104 = 4680. Step 5: Therefore the investor must pay Rs 4680 to buy Rs 4500 nominal value of stock. Verification / Alternative check: A quick check is to note that the premium is 4 percent on Rs 4500, which is 0.04 * 4500 = Rs 180. Adding this to the nominal value 4500 gives 4500 + 180 = Rs 4680, which matches the detailed calculation. This alternative view reinforces the correctness of the result. Why Other Options Are Wrong:

• Rs 1400: Far too small; it ignores both nominal value and premium.
• Rs 5000: This would correspond to a much higher effective premium than 4 percent.
• Rs 4000: This is less than the nominal value and would represent a discount, not a premium.

Common Pitfalls:

• Using 4 percent of the market value instead of the nominal value.
• Interpreting 4 premium as Rs 4 rather than 4 percent on Rs 100 nominal.
• Confusing dividend percentage with premium percentage when only cost is asked.

Final Answer: The total cost of purchasing the stock is Rs 4680.