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Question
Rohit invested Rs. 9,600 on Rs. 100 shares at Rs. 20 premium paying 8% dividend. Rohit sold the shares when the price rose to Rs. 160. He invested the proceeds (excluding dividend) in 10% Rs. 50 shares at Rs. 40. Find the:
- original number of shares.
- sale proceeds.
- new number of shares.
- change in the two dividends.
Solution
i. 100 shares at Rs. 20 premium means
Nominal value of the share is Rs. 100
And its market value = 100 + 20 = Rs. 120
Number of shares = `"Money Invested"/"Market value of 1 share"`
= `9600/120`
= 80
ii. Each share is sold at Rs. 160
∴ Sale proceeds = 80 × Rs. 160 = Rs. 12,800
iii. Now, investment = Rs. 12,800
Dividend = 10%
Net value = 50
Market value = Rs. 40
∴ Number of shares = `"Investment"/"Market value"`
= `12800/40`
= 320
iv. Now, dividend on 1 share = 10% of N.V = 10% of 50 = 5
`\implies` Dividend on 320 shares = 320 × 5 = 1600
Thus, change in two dividends = 1600 – 640 = 960
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