Question

A man invested ₹ 260000 in 5% stock at 104. He sold the stock when the price rose to ₹ 125 and invested the sale proceeds in 6% stock. By doing this his income increased by ₹ 2500. At what price did he purchase the second stock?

Answer 1

Given:

Initial investment = ₹ 260,000 in 5% stock at ₹ 104

He sells it at ₹ 125 and invests in 6% stock

Income increases by ₹ 2500

Nominal value:

`=(260000/104)xx100`

= ₹ 250000

Income = 5% of ₹ 250000

`=5/100xx250000`

= ₹ 12500

Sale proceeds = `(250000/100)xx125`

= ₹ 312500

New income:

= ₹ 12500 + ₹ 2500

= ₹ 15000

Nominal value bought with ₹ 312500 at ₹ x:

Nominal value: 

`=(312500/x)xx100`

Income = 6% of nominal value

`=6/100xx(312500/x xx100)`

`= (6xx312500)/x`

`=> (6xx312500)/x=15000`

`=> 1875000/x =15000`

`x = 1875000/15000`

= 125