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 :

(i) the sale proceeds

(ii) the number of Rs 125 shares he buys.

(iii) the change in his annual income from dividend.

Answer 1

(i)
Total investment = Rs. 4,500
Market value of 1 share = Rs. 15
∴ No of shares purchased = = 300 𝑠ℎ𝑎𝑟𝑒𝑠
Nominal value of 1 share = Rs. 10
Nominal value of 300 shares = Rs. 10 $\times$ 300 = Rs. 3000
Dividend = 8% of Rs. 3,000
= $\times$ Rs. 3,000 = Rs. 240
Sale price of 1 share = Rs. 30
Total sale price = Rs. 30 $\times$ 300 = Rs. 9,000

(ii)
new market price of 1 share = Rs. 125
∴ No of shares purchased = = 72 𝑠ℎ𝑎𝑟𝑒𝑠

(iii)
New nominal value of 1 share = Rs. 100
New nominal value of 72 shares = Rs. 100 $\times$ 72 = Rs. 7,200
Dividend% = 12%
New dividend = 12% of Rs. 7,200
= $\times$ 𝑅𝑠. 7,200 = 𝑅𝑠. 864
Change in annual income = Rs. 864 – Rs. 240
= Rs. 624