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    Question

    An 8% Rs. 100 face-value stock is quoted at Rs. 120 in

    the market. The brokerage charged is 5% on the market price. If an investor wants to get an annual income of Rs. 6,048 from this stock, how much money must he pay in total (including brokerage) to buy the required shares?
    A Rs. 90,720 Correct Answer Incorrect Answer
    B Rs. 95,256 Correct Answer Incorrect Answer
    C Rs. 96,048 Correct Answer Incorrect Answer
    D Rs. 1,00,800 Correct Answer Incorrect Answer

    Solution

    ATQ, Face value per share = Rs. 100 Dividend rate = 8% Dividend per share per year = 8% of 100 = Rs. 8 Let the number of shares purchased be n. Total annual income = n × 8 Given total income = 6,048 So, n × 8 = 6,048 ⇒ n = 6,048 / 8 = 756 shares Market price per share = Rs. 120 Brokerage = 5% of market price Brokerage per share = 5% of 120 = 0.05 × 120 = Rs. 6 Effective cost per share = 120 + 6 = Rs. 126 Total amount paid = number of shares × cost per share = 756 × 126 Compute: 756 × 126 = 756 × (100 + 20 + 6) = 756×100 + 756×20 + 756×6 = 75,600 + 15,120 + 4,536 = 95,256 So the investor must pay Rs. 95,256.

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