Hey you lovely Samaritans....?

Question

would you help me understand this question? A person sold 4% stock worth 3200 acquired at par Rs.100, for Rs. 90 and bought 6% stock at par Rs. 100. With the remaining money he purchased Rs. 10, 6% shares at par. What was the increase in the annual dividend?

Answer 1

This is obviously a homework question and you need to work it out yourself but I'll give you some help since you probably don't know how to do it.

This appears to be preferred stock and the way it works is that the dividend is a certain percentage of par value.  So in your question, a 4% stock with a par of $100 would pay a $4 dividend (100x.04) for each share owned.  Now how many shares did you have?  Well, it says the stock cost $3200 and you bought at par of $100 so you must have 32 shares (3200/100).  So your total dividends on the first stock were $4 x 32 = $128.  Now if he sells 32 shares at $90, he'll get 32x90 = $2880.  Now figure out how much of the new stock he was able to buy and the dividend on the stock he bought and you can get the increase.