Question

A dividend of 12% was declared on Rs 150 shares selling at a certain price. If the rate of return is 10%, calculate :

(i) the market value of the shares.

(ii) the amount to be invested to obtain an annual dividend of Rs 1,350.

Answer 1

(i)
Nominal value of 1 share = Rs. 150
Dividend% = 12%
Dividend on 1 share = 12% of Rs. 150
= $\times$ 𝑅𝑠. 150 = 𝑅𝑠. 18
Let market value of 1 share = Rs y
Return% = 10%
10% of Rs (y) = Rs. 18
⇒ $\times$ 𝑦 = Rs. 18
⇒ y = Rs. 180

(ii)
When the dividend is Rs. 18, then the investment is Rs. 180
When the dividend is Rs. 1,350, the investment
= $\times$ 𝑅𝑠. 1,350
= Rs. 13,500