A man buys 400, twenty-rupee shares at a discount of 20% and receives a return of 12% and receives a return of 12% on his money. Calculate :

(i) the amount invested by him.

(ii) the rate of dividend paid by the company.

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Solution

(i)Nominal value of 1 share = Rs. 20
Market value of 1 share = Rs. 20 − 20% of Rs. 20
= Rs. 20 – Rs. 4 = Rs. 16
No. of shares purchased = 400
Nominal value of 400 shares = 400 $\times$ 20 = Rs. 8,000
Market value of 400 shares= 400 $\times$ 16 = Rs. 6,400

(ii) Return% = 12%
Income = 12% of Rs. 6,400
= $\times$ Rs. 6,400 = Rs. 768
Dividend % = $fraction numerator income over denominator Nominal value end fraction$ $\times$ 100%
= $fraction numerator 768 over denominator 8 comma 000 end fraction$ $\times$ 100% = 9.6%

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