The nominal value of share of a public limited limited company is 50k and the market value is 65k. The company’s share is selling?
-
above par value
- at par value
- below par value
- ex dividend
- cum dividend
The correct answer is: A
Explanation
The nominal value of a share is the value assigned to a share at the time of issuance by the issuing company. It is also known as the par or face value of a share.
While the market value of a share is the price a company's share would trade for in the stock market.
When the nominal value is less than the share's market value, then the share is said to be above the par value or sold at a premium.
From the question above, the company set the price of the share at 50k, but it was sold at 65k, which is 15k above the nominal value. Hence it was sold at a premium or above the par value.
Please note that a company can set a certain price for its shares, and it may end up selling above or below the price that was set, or even at the same price it allocated for the shares.