Question
A man bought 360, ten-rupee shares of a company, paying 12% 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 per cent per annum at Rs 3.50 per share. Find the annual change in his income.
Solution
1st 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`
2nd 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
`= 4.5/132 xx 10800 = "Rs" 486`
Annual change in income = Rs 486 – Rs 432
= Rs 54 increase
