Question

A man invests Rs 7,770 in a company paying 5 percent dividend when a share of nominal value of Rs 100 sells at a premium of Rs 5. Find :

(i) the number of shares bought;

(ii) annual income ;

(iii) percentage income

Answer 1

Investment= Rs 7700
Div= 5%
N.V= Rs 100
Premium= Rs 5
M.V of 1 share= Rs 105
Total Dividend= Rs 8085
i) $Noofshare=\frac{TotalDividend}{Marketvalueofoneshare}$
= $\frac{8085}{105}$
= 77
ii) $Annualincome=No.ofshares\times Rateofdiv.\times N.V‘of1‘share$
$=77\times \frac{5}{100}\times 100$
= Rs 385
iii) Percentage income $=\frac{385}{7700}\times 100$
= 5%