Question

A man buys a ₹ 10 share in a company at a premium of ₹ 2 which pays 9 % dividend. Find the rate of interest on his investment ?

• A. 6%
• B. 9%
• C. 15%
• D. 7.5%

Answer 1

The correct option is D

7.5%

Let the rate of interest be x

N.V = ₹ 10

M.V of the share is ₹ 10 shares at a premium of ₹ 2 ;

Hence the M.V of the share = ₹ 12

We know

Rate of Interest x M.V = Rate of Dividend x N.V

$x$ % $\times$ 12 = 9 % $\times$ 10

Rate of interest $x$ = $\frac{9\times 10\times 100}{100\times 12}$

= 7.5 %