A retired man sells out Rs. 7500 of a 10% stock at Rs. 105.50 and invests the proceeds in 14% stock at Rs. 124.50. What is the change in income if he pays a service charge of 0.5% of the face value on each transaction ?

Solution (By Examveda Team)

Number of shares sold = $$\frac{7500}{100}$$   = 75
Proceeds from sale of Rs. 7500 stock
= Rs. [(105.50 - 0.5) × 75]
= Rs. 7875
Number of new shares purchased
$$\eqalign{ & = \left( {\frac{{7875}}{{124.50 + 0.50}}} \right) \cr & = \left( {\frac{{7875}}{{125}}} \right) \cr & = 63 \cr} $$
Original income
= 10% of Rs. 7500
= Rs. 750
New income
= 14% of Rs. 6300
= Rs. $$\left( {\frac{{14}}{{100}} \times 6300} \right)$$  
= Rs. 882
∴ Change in income
= Rs. (882 - 750)
= Rs. 132