Professional Documents
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Investment
Market value of one share.
Annual Income
100
Investment
SOLVED EXAMPLES
Example: 1.
What is the annual income derived by investing Rs.1000 at 12.5% at 80?
Sol:
Number of share =
1000
= 12.5
80
12.5
= 156.25
100
156.25 100
= 15.625%
1000
Example: 2.
Ravi invests Rs 12000 in Rs 100 share selling at a premium of Rs 20. The company pays a dividend of 8%. Calculate,
(a) The number of share held by Ravi,
(b) His annual income,
(c) Yield.
Sol:
Number of share =
12000
= 100
120
Rate of returns =
8
= Rs.800.
100
800
100 = 6.67%
12000
Example: 3.
What is the nominal interest earned by investing Rs.12,000 in 16% stock at at 96?
Sol:
Number of share =
12000
= 125.
96
16
125 = Rs.2000
100
Example: 4.
What is the yield in Rs.1000 investment in 14% at 85?
Sol:
Number of share =
1000
= 11.76
85
Yield =
14
= Rs.164.7
100
164.7 100
= 16.47%.
1000
Example: 5.
What is the amount paid as brokerage at 2% on the purchase of Rs. 15, 000 (Nominal Value) in 15% stock at 81?
Number of shares =
15000
= 150
100
Example: 6.
What is the total value of 16% stock at 93.5 that can be purchased for Rs. 1122?
Sol:
1122 11220
=
= 12
93.5
935
Total value of the stock = 12 100 = Rs.1200.
Number of shares =
Example: 7.
Ram sold his car for 40,000 and invested 75% of the proceeds in Rs. 10 shares at 15 paying a dividend of 20%. After a year,
he sold the shares for Rs. 18 and invested the proceeds in Rs. 100 shares trading at Rs. 120 offering a dividend of 24%. Find
the change in his annual income.
Sol:
Case I
Investment = 40, 000
75
= Rs.30, 000
100
30, 000
= 2000
15
20
= Rs.4000
100
Case II
Number of shares =
36000
= 300
120
24
= Rs.7200
100
Change in the annual income = 7200 - 4000 = Rs. 3200
Annual Income = 300 100
Example: 8.
What is the cash price of 14.5% stock if it yields a return of 3.75%
Annual Income = 1 100
14.5
= 14.5
100
Rate of return =
Annual Income
100
Investment
Therefore 3.75 =
14.5
100
x
145000
= 386.67
375
cash price = R s.386.67.
Solving, x =
Example: 9.
Which of the following investment is better ? 8% Rs. 100 share at Rs. 120 or 9% Rs. 10 share at Rs 15.
Sol:
Annual Income from Rs.100 share at 120 at 8% = 1 100
Rate of return =
8
= Rs.8
100
8
100 = 6.67%
120
9
9
=
= 0.9
100 10
0.9
100 = 6%
15
Hence the former investment is better.
Rate of return =
Example: 10.
How much should be invested in 14.2% stock at 98 to produce the same income as would be obtained by investing Rs. 9975
in 15% stock at 105?
Sol:
Number of share =
9975
= 95.
105
15
= Rs.1425.
100
Example: 11.
A person sells out Rs. 4000 shares at 6.25% of Government of Indian stock at 112.5 and reinvests the proceeds in 8% railway
debentures thereby increasing his annual income by Rs. 50. At what price did he buy the debenture?
Sol:
Number of share =
4000
= 40
100
62.5
= Rs.250
100
8
100 x
100
300
= 37 . 5
8
4500
= 120
37.5
8
20
+ y 10
100
100
8x
+ 2y = 200
10
..... (2)
2000 15
Dividend received by Raja = Rs.
= Rs. 300.
100
Let the market value of 200 shares be Rs. x. We have to find x such that 12% of x = 300,
100 300
= 2500
12
i.e. Market value of 200 shares = Rs. 2500
Hence, the market value of one share = Rs. 12.50
i.e.
12
x = 300
100
x =
Example: 14.
Find the income from Rs. 2875 of 4% stock.
Sol:
By 4 % stock, we mean a stock of Rs. 100 will fetch a dividend of Rs. 4 p.a.
Hence, the income from Rs. 2875 of 4% stock =
2875 4
= Rs. 115.
100
Example: 15.
Find the income on 10% stock of Rs. 25000 purchased at Rs. 120.
Sol:
Face value of stock = Rs. 25000
Income on Rs. 100 stock = Rs. 10
10
25000 10
100
1
% stock at 80 (Brokerage: 2%).
2
Sol:
80 = Rs.1.60
Brokerage = 2% of Rs. 80 = Rs.
100
Investment
1
2
1
2
For income of Rs. 4200, the investment = = Rs. 81.60 4200 = Rs.32640
21
Example: 17.
Ram bought Rs. 12000, 8% stock at 92 and sold it when the price rose to 98. Find his total gain and gain percent
Sol:
Investment made by Ram in buying Rs. 12000 of 8% stock at 92
92
= Rs.11040
= Rs. 12000
100
When the price rose to Rs. 98, Ram sold the stock, thus money realized from selling the stock
98
= Rs.11760
= Rs. 12000
100
fdgdfgdg
( 720 100 )
11040
=6
12
%
23
ff
Example: 18.
Ram invests Rs. 46500 in 6% stock at 93 and sells the stock when its price rose to Rs. 95. He invests the sale proceeds in 9%
stock at 95. Find the change in Rams income.
Sol:
6
95
46500 = Rs.47500
93
1
.
3
Example: 20.
Ram has 500 shares of par value Rs. 10 each of a company and 500 debentures of par value Rs. 100 each. The company pays
a dividend of 8% on the shares and pays an interest of 10% on its debentures. Find the total annual income of Ram and the
rate of return on his investments.
Sol:
Annual dividend on 500 shares = Rs.
(500 10 8)
= Rs.400.
100
108
9
5400
100 % =
Rate of return on Ram's investment =
% or 9 .
11
11
55000
Practice Exercise - 1
1.
Jatin invested Rs. 17260 in buying Rs. 100 shares of a company at Rs. 116 each. If the company paid 16 % dividend at the
end of the year, find his income from the dividend. (Access Code - 01307001)
(1) Rs. 2716.6
(2) Rs. 2760
(3) Rs. 3570
(4) Rs. 3660
(5) Rs. 2380.7
2.
A company issued 50000 shares of per value Rs. 10 each. If the total dividend declared by the company is Rs. 62500, find
the rate of dividend paid by the company. (Access Code - 01307002)
1
(1) 8 %
2
3.
1
(2) 12 %
2
(3) 12 %
3
(4) 13 %
4
(5) 13 %
1
A company declared a semi-annual dividend of 17 % .Find the annual dividend of Chetan, owning 1250 shares of the
2
company having a par value of Rs. 10 each (Access Code - 01307003)
(1) Rs. 2078.5
(2) Rs. 1757
(3) Rs. 1680
(4) Rs. 1093.75
(5) Rs. 2187.5
4.
Mac buys 200 shares of par value Rs. 10 each, of a company, which pay an annual dividend of 8% at such a price that he
gets 10% on his investment. Find market value of one share? (Access Code - 01307004)
(1) Rs. 9
(2) Rs. 10
(3) Rs. 6
(4) Rs. 12
(5) Rs. 8
5.
Find the income on 12% stock of Rs. 60000 purchased at Rs. 110. (Access Code - 01307005)
(1) Rs. 7000
(2) Rs. 7500
(3) Rs. 6545.45
(4) Rs. 8200
6.
7.
8.
9.
1
A person buys 9 % stock of Rs. 72000 at 144. Find his annual income. (Access Code - 01307006)
2
(1) Rs. 4750
(2) Rs. 6840
(3) Rs. 6900
(4) Rs. 7240
(5) Rs. 6500
1
Raja invested Rs. 99000 in 7 % stocks at 112 (Brokerage: Rs. 2) Find annual income of Ram from this investment. (Access
2
Code - 01307007)
(1) Rs. 6750
(2) Rs. 6629
(3) Rs. 6513
(4) Rs. 7425
(5) Rs. 7525
1
Find the investment required to get an income of Rs. 1938 from 9 % stock at 90 (Brokerage 1%). (Access Code - 01307008)
2
(1) Rs. 19642.60
(2) Rs. 17543.00
(3) Rs. 18543.60
(4) Rs. 18600.60
(5) Rs. 18532.71
A man invests Rs. 27600 in 4% stock at 92. He sold Rs. 20000 stock when the price rose to Rs. 96, and sold the remaining
stock when the market value fell to Rs. 90. How much does he gain or loss in the transaction? (Access Code - 01307009)
(1) Gain= Rs. 600
(2) Loss = Rs. 600
(3) Loss = Rs. 650
(4) Gain = Rs. 650
(5) None of these
10. A person invests Rs. 28500 in 5% stock at 95. He sold Rs. 15000 stock when the price rose to Rs. 98 and sold the remaining
stock when the market value of the stock fell to Rs. 90. How much does he gain or loss in the transaction? (Access Code 01307010)
(1) Gain = Rs. 300
(2) Loss = Rs. 300
(3) Gain = Rs. 400
(4) Loss = Rs. 400
(5) Gain = Rs. 500
11. A man who owned 25% of the equity capital of a certain company sold 1/3 of his holding last year and 5/12 of the remaining
this year. What part of the business does he now own? (Access Code - 01307011)
(1) 1/5
(2) 5/144
(3) 8/13
(4) 65/72
(5) 7/72
12. Find what a purchaser would have to pay for 300 shares of Rs. 10 each quoted at Rs. 25. What would be the gain to the
shareholder, if he had purchased the share at par? (Access Code - 01307012)
(1) Rs. 5000, Rs. 4500
(2) Rs. 5500, Rs. 450
(3) Rs. 7500, Rs. 4500
(4) Rs. 4000, Rs. 7500
(5) None of these
13. Which one of the following is the best investment? (Access Code - 01307013)
(1) 13% stock at 104
(2) 17% stock at 140
(3) 15% stock at 125
(4) 9 % stock at 70
(5) 9 % stock at 17
1
14. Divide Rs. 5300 into two parts such that if one part is invested in 10 % at 98 and the other in 12% at par, the resulting
2
income are equal (neglect brokerage). (Access Code - 01307014)
(1) Rs. 2800, Rs. 2500
(2) Rs. 3200, Rs. 2100
(3) Rs. 2500, Rs. 2800
(4) Rs. 2100, Rs. 3200
(5) Data insufficient
1
1
15. Find the cash realized by selling Rs. 2400, 5 % stock at 5 premium (brokerage % ). (Access Code - 01307015)
2
4
(1) Rs. 2614
(2) Rs. 2400
(3) Rs. 2514
(4) Rs. 2714
(5) Rs. 3500
SCORE SHEET
1
10
13
11
14
12
15
Practice Exercise - 2
1.
Find the annual dividend received by Sunil for his 200 preferred shares and 1000 common shares, both of par value Rs. 100
1
each if the dividend declared on a preferred share is 10% per annum and an annual dividend of 12 % on the common
2
shares (Access Code - 01307016)
(1) Rs. 12500
(2) Rs. 14500
(3) Rs. 12000
(4) Rs. 15000
() Rs. 13500
2.
Company issued 50000 shares of par value Rs. 100 each. If the total dividend declared by the company is Rs. 125000, out
of which Rs. 50000 have been kept in reserve fund and the remaining is distributed as dividend, find the rate of dividend
paid by the company. (Access Code - 01307017)
1
(1) 2 %
2
3.
1
(2) 1 %
2
1
(3) 1 %
4
(4) 2 %
(5) 3 %
1
1
Determine the increase in income obtained by transferring Rs. 4000 of 3 % stock at 87 to 6 % stock at 145. (Access
4
4
Code - 01307018)
(1) Rs. 10 increase
(2) Rs. 20 increase
(3) Rs. 15 increase
(4) Rs. 25 increase
(5) None of these
4.
A company has issued 10000 preferred shares and 50000 common shares both of par value Rs. 100 each. The dividend on
a preferred share and a common share is 12% and 17.6 %, respectively. The company had a total profit of 15 lakh rupees out
of which some amount was kept in reserve fund and the remaining distributed as dividend. Find the amount kept in reserve
fund. (Access Code - 01307019)
(1) Rs. 5 lakh
(2) Rs. 6 lakh
(3) Rs. 6.5 lakh
(4) Rs. 5.5 lakh
(5) Rs. 7 lakh
5.
A man sells 5000 common shares of a company X (each of par value Rs. 10), which pays a dividend of 20%, at Rs. 30 per
share. He invests the sale proceeds in ordinary shares of Company Y each of par value Rs. 25) that pays a dividend of 15%.
If the market value of a share of Company Y is Rs. 40, find the number of shares of Company Y purchased by the man.
(Access Code - 01307020)
(1) 3850
(2) 3600
(3) 3700
(4) 3800
(5) 3750
6.
A man invested Rs. 260000 in 5% stock at 104. He sold the stock when the price rose to Rs. 125 and invested the sale
proceeds in 6% stock. By doing this, his income increased by Rs. 2500. At what price did he purchase the second stock?
(Access Code - 01307021)
(1) Rs. 225
(2) Rs. 175
(3) Rs. 200
(4) Rs.150
(5) Rs. 125
7.
By investing in a company paying a dividend of 30% one obtains a return of 12%. Companys Rs. 10 shares is quoted at
(Access Code - 01307022)
(1) Rs. 35
(2) Rs. 20
(3) Rs. 25
(4) Rs. 45
(5) Rs. 40
8.
A man buys Rs. 20 shares paying 9% dividend. The man wants to have an interest of 12% on his money. The market value
of each share must be (Access Code - 01307023)
(1) Rs. 12
(2) Rs. 15
(3) Rs. 18
(4) Rs. 21
(5) Rs. 19
9.
Having Rs. 8370 to invest, a man puts part of it in 9% stock at 96 and the remainder in 12% stock at 120. If his dividend from
each investment is same, amount invested in second stock was (Access Code - 01307024)
(1) Rs. 4140
(2) Rs. 4320
(3) Rs. 4050
(4) Rs. 4230
(5) Rs. 4530
1
10. The sale proceeds of Rs. 4500, 6 % stock at 95 is transferred to 16% stock and there by income increases by Rs 11.50. The
2
price of 16% stock is (Access Code - 01307025)
(1) Rs. 110
(2) Rs. 150
(3) Rs. 175
(4) Rs. 200
(5) Rs. 225
SCORE SHEET
1
10
Answer Key
Practice Exercise -1
1. (5)
2. (3)
3. (5)
4. (5)
5. (5)
6. (2)
7. (3)
8. (3)
9. (1)
10. (2)
11. (5)
12. (3)
13. (4)
14. (1)
15. (3)
Practice Exercise -2
1. (2)
2. (2)
3. (2)
4. (1)
5. (5)
6. (5)
7. (3)
8. (2)
9. (3)
10. (4)