A man invested Rs. 26000 in 5% stock at 104. He sold the stock when the price rose to Rs. 120 and invested the sale proceeds in 6% stock. By doing this his income increased by Rs. 2500. At what price did he purchase the second stock?
Explanation:
Assuming that face value of the first stock = Rs.100 as it is not given in the question
Since it is a 5% stock, we can take the dividend per stock = Rs.5
Market Value of the first stock = Rs.104
Investment on the first stock = Rs.26000
Number of stocks purchases = 26000/104 = 250
His total income from all these stocks = Rs.250 × 5 = Rs.1250
He sells each of this stock at Rs.120
ie, amount he earns = Rs.120 × 250 = Rs.30000
He invest this Rs.30000 in 6% stock (here also face value is not given and hence take it as Rs.100)
His new income = Rs.(1250 + 2500) = Rs.3750
ie, By Rs.30000 of investment , he earns an income of Rs.3750
To get an income of Rs.6, investment needed = 3000 x 6 /3750 = 48 rs.
Hence, option 2 is the correct answer.
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By: Amit Kumar