Rana bought 500 shares of HCL at a rate that yielded him 20 % return on a 24%, Rs 350 share. Later on , the company issued a bonus share for every 10 shares held. When the market price was Rs 480 he sold all the shares and invested the proceeds in buying Rs 300 shares of IBM paying a dividend of 27.5%. The yield percent on his investment now was 25%. Find Rana's investment and change in his annual income
To find Rana's investment and change in his annual income, we need to analyze the given information step by step.
Step 1: Calculate Rana's investment in HCL.
Let's assume the initial investment in HCL is X rupees.
According to the given information, Rana bought 500 shares of HCL at a rate that yielded him a 20% return on a 24% share. This means the rate at which he bought the shares is 24% per share, and the return on investment is 20%.
The cost of one share of HCL = Rs 24
The selling price of one share of HCL = Rs 24 + 20% of Rs 24 = Rs 24 + Rs 4.8 = Rs 28.8
So the total investment in HCL is:
X = Rs 28.8 * 500 = Rs 14,400
Step 2: Calculate the number of bonus shares Rana received.
The company issued a bonus share for every 10 shares held. Since Rana had 500 shares, he will receive 500/10 = 50 bonus shares.
Step 3: Calculate the total number of shares Rana has after receiving bonus shares.
The total number of shares Rana has after receiving bonus shares = 500 + 50 = 550 shares.
Step 4: Calculate the total value of Rana's HCL shares after receiving bonus shares.
Since the market price was Rs 480 when Rana sold all his shares, the total value of his HCL shares after receiving bonus shares is:
Value of 550 shares = 550 * 480 = Rs 264,000
Step 5: Calculate Rana's investment in IBM.
Rana sold all his HCL shares and invested the proceeds in buying Rs 300 shares of IBM. Let's assume the number of IBM shares he bought is Y.
The total investment in IBM is:
Y = Rs 264,000 / Rs 300 = 880 shares
Step 6: Calculate the annual income from the IBM investment.
The yield percent on Rana's investment in IBM is 25%. Let's assume the dividend per share of IBM is D.
Total dividend = Y * D
Total income from IBM investment = Total dividend * 100 / Yield percent
According to the information, the yield percent on Rana's IBM investment is 25%.
So, Total income from IBM investment = Total dividend * 100 / 25.
Step 7: Calculate the change in Rana's annual income.
Change in annual income = Total income from IBM investment - Total income from HCL investment
By substituting the respective values, you can find the change in Rana's annual income.