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Question
Rohit had 1000 shares of Rs 125 each of 'New Delhi Times' paying a dividend of 12%. He sold all of them at a market rate of Rs 150 and invested the proceeds in buying Rs 25 shares of BVL available at Rs 60 and paying 20% dividend. How many shares of BVL did Rohit buy and what is the change in his annual income?
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Solution
In first case:
No. of shares sold = 1000
Face value of each share = Rs 125
Face value of 1000 shares = Rs (125 x 1000) =Rs 1,25,000
Market value of each share = Rs 150
Market value of 1000 shares = Rs ( 150 x 1000) = Rs 1,50,000
Dividend (income) for 1000 shares = 12 % of Rs 1,25,000 = Rs `(12 xx 125000)/100` = Rs 15000
In second case:
Proceeds from selling 1000 shares = Rs 1, 50, 000
Face value of each share = Rs 25
Market value of each share = Rs 60
No. of shares bought = `150000/60 = 2500`
Rohit bought 2,500 shares of Rs 60 each.
Face value of 2,500 shares =Rs (25 x 2,500) =Rs 62,500
Dividend (income) for 2,500 shares = 20 % of Rs 62,500 = `(20 xx 62500)/100` = Rs 12500
Change in annual income= Rs (12,500 -15,000) = - Rs 2,500 (less)
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