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Question
A man sold 400 (Rs. 20) shares of a company paying 5% at Rs. 18 and invested the proceeds in (Rs. 10) shares of another company paying 7% at Rs. 12. How many (Rs. 10) shares did he buy and what was the change in his income?
Solution
1st case:
Nominal value of 1 share = Rs. 20
Nominal value of 400 shares = Rs. 20 × 400 = Rs. 8,000
Market value of 1 share = Rs. 18
Market value of 400 shares = Rs. 18 × 400 = Rs. 7,200
Dividend% = 5%
Dividend = 5% of Rs. 8,000
= `5/100 xx 8000`
= Rs. 400
2nd case:
Nominal value of 1 share = Rs. 10
Market value of 1 share = Rs. 12
∴ No of shares purchased = `7200/12` = 600 shares
Nominal value of 600 shares = Rs. 10 × 600 = Rs. 6,000
Dividend% = 7%
Dividend = 7% of Rs. 6,000
= `7/100 xx 6000`
= Rs. 420
Annual change in income = Rs. 420 – Rs. 400
= Rs. 20 increase
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