Mr. Ravi invests Rs 80000 in 10% Rs 100 shares at 25% premium. Find the annual income if the income-tax is deducted at the rate of 20%. Later on, he sells half the shares at Rs 140 and invests the sale value in 15% Rs 10 shares available at 20% discount. Find his new annual income, if the income tax is deducted at the same rate.
Answer & explanation
Correct answer: option 4
The correct answer is option (4): ₹9280
Total investment $=₹80000$
Market price of 1 share of $₹100=₹100\left(1+\frac{25}{100}\right)$ $=₹125$
No. of shares bought $=\frac{₹80000}{₹125}=640$
Dividend received on 1 share $=₹\left(\frac{10}{100}×100\right)$ $= ₹10$
Dividend received on 640 share $=₹(10×640)$ $= ₹6400$
Income tax deducted = 20% of ₹6400
$=\frac{20}{100}×6400$ $=₹1280$
∴ Mr. Ravi's annual income $= ₹6400 - ₹ 1280 $ $= ₹5120$
Selling price of half shares i.e 320 @ 140 each $=₹(140×320)=₹44800$
Ravi invested the sale proceeds in ₹ 10shares at 20% discount
Market price of 1 share of $₹10 = 10 \left(1-\frac{20}{100}\right)$ $=₹8$
∴ No. of 8 shares purchased $=\frac{₹44800}{₹8}=5600$
Dividend on 1 share of ₹8 $=₹\left(\frac{15}{100}×10\right)$ $=₹1.5$
5600 shares of $₹8 = ₹(1.5×5600)$ $= ₹8400$
Dividend on 320 shares each of market value of $₹125 = ₹ (10×320)$ $=₹3200$
∴ Total dividend received $= ₹ 8400+ ₹3200$ $= ₹ 11600$
Now, income tax deducted = 20% of ₹ 11600 $= ₹ 2320 $
∴ Now annual income $= ₹ 11600- ₹ 2320$ $=₹9280$