A person has 3 percent stock which yields $240 a year. He sells out 1/4 of the stock at and invests the proceeds in Railway stock at $174.5. What dividend should the latter pay so that he may thereby increase his oncome to $40?

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- Nov 5th 2012, 04:49 PMhisajeshStock and price problem please help.
A person has 3 percent stock which yields $240 a year. He sells out 1/4 of the stock at and invests the proceeds in Railway stock at $174.5. What dividend should the latter pay so that he may thereby increase his oncome to $40?

- Nov 6th 2012, 12:38 AMchiroRe: Stock and price problem please help.
Hey hisajesh.

Can you show us a model for dividend payment and use that to derive the parameter of interest? - Nov 6th 2012, 06:03 PMHallsofIvyRe: Stock and price problem please help.
Isn't there something missing here?

Quote:

and invests the proceeds in Railway stock at $174.5. What dividend should the latter pay so that he may thereby increase his oncome to $40?

**by**$40 (to $280)? - Nov 6th 2012, 06:05 PMhisajeshRe: Stock and price problem please help.
Here is the forumals and definitions used:

Dividend: Dividend is expressed as a percentage of the face value. (face value of a share is taken as $100 unless specified.)

Income per share=Rate of dividend X face value of 1 share.

Annual income=Income per share X Number of shares

Let me know if you need any other info - Nov 6th 2012, 06:09 PMhisajeshRe: Stock and price problem please help.
@ Halls Of Ivy: $240 will get split in to $60 and the increase is 60+40=$100.