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Question
A man sells 2000 ordinary shares (par value ₹ 10) of a tea company which pays a dividend of 25% at ₹ 33 per share. He invests the proceeds in cotton textiles (par value ₹ 25) ordinary shares at ₹ 44 per share which pays a dividend of 15%. Find
- the number of cotton textiles shares purchased and
- change in his dividend income.
Solution
Shares of tea company
No. of ordinary shares = 200
F.V. = ₹ 10
M.V. = ₹ 33
Dividend = 25%
Selling price of 1 share = ₹ 33
∴ Selling price of 2000 shares = 2000 × 33 = ₹ 66,000
Shares of Cotton textiles
Investment = ₹ 66,000
F.V. = ₹ 25
M.V. = ₹ 44
Dividend = 15%
i. ∴ No. of cotton textile shares = `"Investment"/("M"."V".)`
= `(66,000)/44`
= 1500 shares
ii. Income from tea company shares = No. of shares × F.V. × Rate percentage
= `2000 xx 10 xx 25/100`
= ₹ 5000
Income from cotton textile shares = No. of shares × F.V. × Rate percentage
= `1500 xx 25 xx 15/100`
= ₹ 5625
Change in his dividend income = 5625 − 5000 = ₹ 625
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