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

(i) his dividend for the first year;

(ii) his annual income in the second year;

(iii) the percentage increase in his return on his original investment.

Given,

For initial investment,

Investment = ₹ 8,000

Face Value = ₹ 100

Market Value = ₹ 80

Dividend Rate = 7%

(i) By formula,

Number of shares = $\dfrac{ \text{Investment}}{ \text{Market value of each share}} = \dfrac{8000}{80}$ = 100

By formula,

Dividend for the first year = No. of shares × Rate of div. × N.V. of 1 share

$= 100 \times \dfrac{7}{100} \times 100$

= ₹ 700

Hence, dividend for the first year is ₹ 700.

(ii) Given,

Selling Price of each share = ₹ 75

Total sale value = Number of shares × Selling Price of each share = 100 × 75 = ₹ 7,500

Total proceeds = Total sale value + Dividend from first year

= ₹ 7,500 + ₹ 700 = ₹ 8,200.

He invested the proceeds in 18%, ₹ 25 shares at ₹ 41.

In second Investment :

Face Value = ₹ 25

Market Value = ₹ 41

Dividend Rate = 18%

By formula,

Number of shares = $\dfrac{\text{Investment}}{\text{Market value of each share}} = \dfrac{8200}{41}$ = 200.

By formula,

Annual income = No. of shares × Rate of div. × N.V. of 1 share

= $200 \times \dfrac{18}{100} \times 25$

= ₹ 900.

Hence, Mr. Ram's annual income in the second year equals to ₹ 900.

(iii) Original annual income = ₹ 700

New annual income = ₹ 900

Increase in income = ₹ 900 - ₹ 700 = ₹ 200

Percentage increase = $\dfrac{\text{Increase in income}}{ \text{Initial investment}} \times 100\%$

= $\dfrac{200}{8000} \times 100\%$

= 2.5%

Hence, the percentage increase in return on original investment equals to 2.5%.