Question

Vivek invests Rs. 4,500 in 8% Rs. 10 shares at Rs. 15. He sells the shares when the price rises to Rs. 30 and invests the proceeds in 12% Rs. 100 shares at Rs. 125. Calculate:

1. the sale proceeds
2. the number of Rs. 125 shares he buys.
3. the change in his annual income from the dividend.

Answer 1

1. Total investment = Rs. 4,500

Market value of 1 share = Rs. 15

∴ No of shares purchased = `4500/15` = 300 shares

Nominal value of 1 share = Rs. 10

Nominal value of 300 shares = Rs. 10 × 300 = Rs. 3,000

Dividend = 8% of Rs. 3,000

= `8/100 xx 3000`

= Rs. 240

Sale price of 1 share = Rs. 30

Total sale price = Rs. 30 × 300 = Rs. 9,000

2. New market price of 1 share = Rs. 125

∴ No of shares purchased = `(9000)/125` = 72 shares

3. New nominal value of 1 share = Rs. 100

New nominal value of 72 shares = Rs. 100 × 72 = Rs. 7,200

Dividend% = 12%

New dividend = 12% of Rs. 7,200

= `12/100 xx Rs. 7200`

= Rs. 864

Change in annual income = Rs. 864 – Rs. 240

= Rs. 624