Cost to buy shares at premium and gain on later sale Shares of par value $10 each are available at a 20% premium. A buyer purchases 2500 shares. How much does the buyer pay, and what is the gain if he later sells those shares at $20 per share?

Introduction / Context:Premium over par increases the buy price; a later sale at a higher absolute price generates a gain equal to the proceeds minus the original purchase amount. We compute both figures for the full lot of shares.

Given Data / Assumptions:

• Par value per share = $10
• Purchase at 20% premium ⇒ buy price = $12
• No. of shares bought = 2500
• Later sell price = $20 per share

Concept / Approach:Amount paid = shares * buy price. Sale proceeds = shares * sell price. Gain = proceeds − amount paid.

Step-by-Step Solution:Amount paid = 2500 * $12 = $30,000Sale proceeds = 2500 * $20 = $50,000Gain = $50,000 − $30,000 = $20,000

Verification / Alternative check:Per-share gain = $20 − $12 = $8; total gain = 2500 * $8 = $20,000.

Why Other Options Are Wrong:The other pairs mismatch either the outlay or the computed gain from $20 resale.

Common Pitfalls:Confusing 20% premium on par ($2) with $20 sell price directly; both must be applied correctly.

Final Answer:$ 30,000 paid; $ 20,000 gain