Question

A man invest a sum of money in Rs. 100 share paying 15 % dividend at 20 % premium if his annual dividend is rupees 540 calculate total investment and the rate of return on investment

Answer 1

Answer :

Nominal value of one share =Rs. 100

Dividend per share = 15% of Rs 100 = Rs.15

Let , total number of share = n

Annual dividend =540
We know ,
Dividend per share $\times$ no of shares = Annual dividend , So

15n = 540

n =36 shares

i ) Premium = 20%

Market value of one share =100 + 20%of 100 = 100 + $\frac{20}{100}\times 100$ = 100 + 20 = Rs.120

Total investment =120 $\times$ 36 = 4320 Rs ( Ans )

ii ) we know ,

Rate of interest on investment =$\frac{Dividend}{Investment}$$\times$ 100
So,

Rate of interest on investment =$\frac{540}{4320}\times 100=\frac{54000}{4320}$ = 12.5 % ( Ans )