Question

the percentage change in his return on her original investment.

Answer 1

Investment=Rs.19200

Div%=15%

Nominal value of each share=Rs.100

Premium=20%

$\therefore$ Market value of each share=100+20% of 100=$100+\frac{20}{100}\times 100=Rs.120$

No.of share$=\frac{investment}{M.Vofeachshare}=\frac{19200}{120}=160$

$\therefore$Div on 1 share=15% of 100=$\frac{15}{100}\times 100=Rs.15$

$\therefore$Dividend for the first year=$15\times 160=Rs.2400$

Since each share is sold for Rs.140

$\therefore$The proceeds(including dividend)=$160\times 140+2400=Rs.24800$

Now the sum invested=Rs.24800

Nominal value of each share=Rs.20

Market value of each share=Rs.16

Dividend=20%

$\therefore$No.of share brought=$\frac{24800}{16}=1550$

Div. on 1 share=20% of 20$=\frac{20}{100}\times 20=Rs.4$

$\therefore$Annual income in second year=$1550\times 4=Rs.6200$

Since increase in return$=6200-2400=Rs.3800$

$\therefore$percentage change in return=$\frac{3800}{19200}\times 100=19.792$%