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Question
Vivek invests Rs. 4,500 in 8% Rs. 10 shares at Rs. 15. He sells the shares when the price rises to Rs. 30 and invests the proceeds in 12% Rs. 100 shares at Rs. 125. Calculate:
- the sale proceeds
- the number of Rs. 125 shares he buys.
- the change in his annual income from the dividend.
Solution
1. Total investment = Rs. 4,500
Market value of 1 share = Rs. 15
∴ No of shares purchased = `4500/15` = 300 shares
Nominal value of 1 share = Rs. 10
Nominal value of 300 shares = Rs. 10 × 300 = Rs. 3,000
Dividend = 8% of Rs. 3,000
= `8/100 xx 3000`
= Rs. 240
Sale price of 1 share = Rs. 30
Total sale price = Rs. 30 × 300 = Rs. 9,000
2. New market price of 1 share = Rs. 125
∴ No of shares purchased = `(9000)/125` = 72 shares
3. New nominal value of 1 share = Rs. 100
New nominal value of 72 shares = Rs. 100 × 72 = Rs. 7,200
Dividend% = 12%
New dividend = 12% of Rs. 7,200
= `12/100 xx Rs. 7200`
= Rs. 864
Change in annual income = Rs. 864 – Rs. 240
= Rs. 624
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