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Question
A man bought 360, ten-rupee shares of a company, paying 12 percent per annum. He sold the shares when their price rose to Rs. 21 per share and invested the proceeds in five-rupee shares paying 4.5 percent per annum at Rs. 3.50 per share. Find the annual change in his income.
Solution
1st case:
Nominal value of 1 share = Rs. 10
Nominal value of 360 shares = Rs. 10 × 360 = Rs. 3,600
Market value of 1 share = Rs. 21
Market value of 360 shares = Rs. 21 × 360 = Rs. 7,560
Dividend % = 12%
Dividend = 12% of Rs. 3,600
= `12/100 xx 3600`
= Rs. 432
2nd case:
Nominal value of 1 share = Rs. 5
Market value of 1 share = Rs. 3.50
∴ No of shares purchased = `7560/3.50` = Rs. 2160 shares
Nominal value of 2160 shares = Rs. 5 × 2160 = Rs. 10,800
Dividend % = 4.5%
Dividend = 4.5% of Rs. 10,800
= `4.5/100 xx 10800`
= Rs. 486
Annual change in income = Rs. 486 – Rs. 432
= Rs. 54 increase
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