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

1) 100 shares at Rs. 20 premium means:

The nominal value of the share is Rs. 100

Market value of each share = 100 + 20 = Rs. 120

Investment = Rs. 9600

∴ Number of shares = `"Investment"/"Market Value of each Share" = 9600/120 = 80`

2) Sale price of each share = Rs. 160

∴ The sale proceeds = 80 x 160 = Rs 12800

3) New investment = Rs. 12,800

Market Value of each share = Rs. 40

∴ Number of shares = `"Investment"/"Market Value of each share" = 12800/40 = 320`

4) Dividend in the 1st investment

= Number of shares x Rate of dividend x N.V of each share

= 80 x 8% x 100

`= 80 xx 8/100 xx 100`

= Rs 640

Dividend in the 2nd investment

= Number of shares x Rate of dividend x N.V of each share

`= 320 xx 10% xx 50`

`= 320 xx 10/100 xx 50`

= Rs 1600

Thus, change in two dividends = 1600 - 640 = Rs 960