Question

A man sells 2000 ordinary shares (par value ₹ 10) of a tea company which pays a dividend of 25% at ₹ 33 per share. He invests the proceeds in cotton textiles (par value ₹ 25) ordinary shares at ₹ 44 per share which pays a dividend of 15%. Find

1. the number of cotton textiles shares purchased and
2. change in his dividend income.

Answer 1

Shares of tea company

No. of ordinary shares = 200

F.V. = ₹ 10

M.V. = ₹ 33

Dividend = 25%

Selling price of 1 share = ₹ 33

∴ Selling price of 2000 shares = 2000 × 33 = ₹ 66,000

Shares of Cotton textiles

Investment = ₹ 66,000

F.V. = ₹ 25

M.V. = ₹ 44

Dividend = 15%

i. ∴ No. of cotton textile shares = `"Investment"/("M"."V".)`

= `(66,000)/44`

= 1500 shares

ii. Income from tea company shares = No. of shares × F.V. × Rate percentage

= `2000 xx 10 xx 25/100`

= ₹ 5000

Income from cotton textile shares = No. of shares × F.V. × Rate percentage

= `1500 xx 25 xx 15/100`

= ₹ 5625

Change in his dividend income = 5625 − 5000 = ₹ 625