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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:
1) original number of shares
2) sale proceeds
3) new number of shares
4) change in the two dividends.
Solution
1) 100 shares at Rs. 20 premium means:
The nominal value of the share is Rs. 100
Market value of each share = 100 + 20 = Rs. 120
Investment = Rs. 9600
∴ Number of shares = `"Investment"/"Market Value of each Share" = 9600/120 = 80`
2) Sale price of each share = Rs. 160
∴ The sale proceeds = 80 x 160 = Rs 12800
3) New investment = Rs. 12,800
Market Value of each share = Rs. 40
∴ Number of shares = `"Investment"/"Market Value of each share" = 12800/40 = 320`
4) Dividend in the 1st investment
= Number of shares x Rate of dividend x N.V of each share
= 80 x 8% x 100
`= 80 xx 8/100 xx 100`
= Rs 640
Dividend in the 2nd investment
= Number of shares x Rate of dividend x N.V of each share
`= 320 xx 10% xx 50`
`= 320 xx 10/100 xx 50`
= Rs 1600
Thus, change in two dividends = 1600 - 640 = Rs 960
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