Question

A person sells Rs. 2,400 of 6% stock at 80 and invests the proceeds in 8% stock at 96. Find the change in his dividend income.

Answer 1

Step 1:

Given information:

Amount of stock$=\mathrm{Rs}.2,400$

First stock rate $=6\%\mathrm{stock}\mathrm{at}\mathrm{Rs}.80$

Second stock rate$=8\%\mathrm{stock}\mathrm{at}\mathrm{Rs}.96$

Step 2:

Calculate dividend on Rs. 2,400 stock:

In 6% stock at 80 ;

$\Rightarrow$Stock purchase of Rs. 100 stock, investment$=\mathrm{Rs}.80$

$\Rightarrow$Stock purchase of Rs. 2,400 stock, investment$=\frac{80}{100}\times 2,400=\mathrm{Rs}.1,920$

$\Rightarrow$Dividend on Rs. 100 stock$=\mathrm{Rs}.6$

$\therefore$Dividend on Rs. 2,400 stock$=\frac{6}{100}\times 2,400=\mathrm{Rs}.144$

Step 3:

Calculate Dividend after investing in second stock:

In 8% stock at Rs. 96;

Since, An investment of Rs. 96, stock purchase$=\mathrm{Rs}.100$

and second stock invested for Rs. 1,920.

$\therefore$ An investment of Rs. 1,920, Stock purchase$=\frac{100}{96}\times 1,920=\mathrm{Rs}.2,000$

Since, Dividend on Rs. 100 stock$=\mathrm{Rs}.8$

$\Rightarrow$Dividend on Rs. 2,000 stock$=\frac{8}{100}\times 2,000=\mathrm{Rs}.160$

$\therefore$Change in dividend$=160-144=\mathrm{Rs}.16$

Hence, dividend income increase by $=\mathrm{Rs}.16$