Question

A man bought 360, ten-rupee shares of a company, paying 12 percent per annum. He sold the shares when their price rose to Rs. 21 per share and invested the proceeds in five-rupee shares paying 4.5 percent per annum at Rs. 3.50 per share. Find the annual change in his income.

Answer 1

1^st case:

Nominal value of 1 share = Rs. 10

Nominal value of 360 shares = Rs. 10 × 360 = Rs. 3,600

Market value of 1 share = Rs. 21

Market value of 360 shares = Rs. 21 × 360 = Rs. 7,560

Dividend % = 12%

Dividend = 12% of Rs. 3,600

= `12/100 xx 3600`

= Rs. 432

2^nd case:

Nominal value of 1 share = Rs. 5

Market value of 1 share = Rs. 3.50

∴ No of shares purchased = `7560/3.50` = Rs. 2160 shares

Nominal value of 2160 shares = Rs. 5 × 2160 = Rs. 10,800

Dividend % = 4.5%

Dividend = 4.5% of Rs. 10,800

= `4.5/100 xx 10800`

= Rs. 486

Annual change in income = Rs. 486 – Rs. 432

= Rs. 54 increase