Question

Govind invested Rs. 19,200 in 15% Rs 100 shares at 20% premium. After a year, he sold these shares at Rs. 140 each and invested the proceeds (including his dividend) in 20%, Rs. 20 shares at Rs. 16. Find:

i) The dividend for the first year.
(ii) Her annual income in the second year.
(iii) The percentage change in his return on her original investment.

Answer 1

1st case
Nominal value of 1 share = Rs. 100
Market value of 1 share = Rs. 100 + 20% of Rs. 100
= Rs. 100 + Rs. 20 = Rs. 120
Total investment = Rs. 19,200
∴ No of shares purchased = `(19,200) /120`= 160 shares
Nominal value of 160 shares= Rs100 x 160= Rs. 16,000
Dividend% = 15%
Dividend = 15% of Rs. 16,000

= `15/100`×16,000 = Rs. 2,400

He sold 160 shares in = Rs. 140 × 160 = Rs. 22,400

2^nd case
Total investment in 2^nd year = Rs. 22,400 + Rs. 2,400
= Rs. 24,800
Nominal value of 1 share = Rs. 20

Market value of 1 share = Rs. 16
∴ No of shares purchased = `(24,800)/16` = 1550 shares
 Nominal value of 1,550 shares = Rs. 20 × 1550 = Rs. 31,000
Dividend% = 20%
Dividend = 20% of Rs. 31,000

= `20/100`×31,000 = 𝑅s. 6,200

Annual change in income = Rs. 6,200 – Rs. 2,400 = Rs. 3,800
The percentage change in his return on his original investment = `(3,800)/(19,200)×100% = 475 /24 % = 19 19/24%`