Question

A man sold 400 (Rs. 20) shares of a company paying 5% at Rs. 18 and invested the proceeds in (Rs. 10) shares of another company paying 7% at Rs. 12. How many (Rs. 10) shares did he buy and what was the change in his income?

Answer 1

1^st case:

Nominal value of 1 share = Rs. 20

Nominal value of 400 shares = Rs. 20 × 400 = Rs. 8,000

Market value of 1 share = Rs. 18

Market value of 400 shares = Rs. 18 × 400 = Rs. 7,200

Dividend% = 5%

Dividend = 5% of Rs. 8,000

= `5/100 xx 8000`

= Rs. 400

2^nd case:

Nominal value of 1 share = Rs. 10

Market value of 1 share = Rs. 12

∴ No of shares purchased =  `7200/12` = 600 shares

Nominal value of 600 shares = Rs. 10 × 600 = Rs. 6,000

Dividend% = 7%

Dividend = 7% of Rs. 6,000

= `7/100 xx 6000`

= Rs. 420

Annual change in income = Rs. 420 – Rs. 400

= Rs. 20 increase