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Example - 5. Mr. Ram Gopal invested Rs. 8,000 in 7% Rs. 100 shares at Rs. 80. After a year he sold these shares at Rs. 75 each and invested the proceeds (including his dividend) in 18%, Rs. 25 shares at Rs. 41. Find :

1. His dividend for the first year
2. His annual income in the second year
3. The percentage increase in his return on his original investment.
   

Solution : For 1st year

Investment = Rs. 8000

Par value = Rs. 100

Market value = Rs. 80

Rate of dividend = 7%

For 2nd year:

Selling price per share = Rs. 75

Par value = Rs. 25

Market value = Rs. 41

Rate of dividend = 18%

(i) Dividend for the first year = (Rs. 7) X 100 = Rs. 700

Sale Proceeds = (Rs.75) X 100 = Rs.7500

Investment in the second year
= Rs. (7500 + 700)
= Rs.8200

No. of shares purchased in the second year = Rs. 8200/Rs. 41 = 200

Dividend per share = 18% of Rs. 25

= 18/100 X Rs. 25

= Rs. 4.50

(ii) Annual income in 2nd year = (Rs. 4.50) X 200 = Rs. 9 00

Increase in income = Rs. (900 - 700) = Rs. 200