Mr. Devendra invested Rs. 8,000 in 7% hundred rupee share at Rs. 80. After a year he sold these share at Rs. 75 each and invested in 18% twenty five-rupee shares at Rs. 41 each. Then his annual income from the second investment is :-
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 900
First investment, in Rs. 100 shares at Rs. 80:
Number of shares \( = \displaystyle\frac{8000}{80} = 100 \)
Dividend for the year \( = 7\% \text{ of } 100 \times 100 = \text{Rs. } 700 \)
After a year he sells the shares at Rs. 75 each:
Sale money \( = 100 \times 75 = \text{Rs. } 7500 \)
He invests the sale money together with the year’s dividend:
Amount invested \( = 7500 + 700 = \text{Rs. } 8200 \)
Number of Rs. 25 shares at Rs. 41 \( = \displaystyle\frac{8200}{41} = 200 \)
Each Rs. 25 share pays 18% of 25 = Rs. 4.50 a year:
Annual income \( = 200 \times 4.50 = \text{Rs. } 900 \)
Why the other options are incorrect
Option (1) Rs. 600 — Incorrect. That would need only 600 / 4.50 ≈ 133 shares.
Option (2) Rs. 800 — Incorrect. Without the dividend, Rs. 7500 buys 7500 / 41 ≈ 182.9 shares, which is not a whole number, and gives about Rs. 823, not Rs. 800.
Option (4) Rs. 1,100 — Incorrect. That would need about 244 shares, costing about Rs. 10,000, more than he has.