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.

Answer 1

i. 100 shares at Rs. 20 premium means

Nominal value of the share is Rs. 100

And its market value = 100 + 20 = Rs. 120

Number of shares = `"Money Invested"/"Market value of 1 share"`

= `9600/120`

= 80

ii. Each share is sold at Rs. 160

∴ Sale proceeds = 80 × Rs. 160 = Rs. 12,800

iii. Now, investment = Rs. 12,800

Dividend = 10%

Net value = 50

Market value = Rs. 40

∴ Number of shares = `"Investment"/"Market value"`

= `12800/40`

= 320

iv. Now, dividend on 1 share = 10% of N.V = 10% of 50 = 5

`\implies` Dividend on 320 shares = 320 × 5 = 1600

Thus, change in two dividends = 1600 – 640 = 960