Question

How much should a man invest in Rs 100 shares selling at Rs 110 to obtain an annual income of Rs 1,680, if the dividend declared is 12%?

Answer 1

Nominal value of 1 share = Rs. 100
Market value of 1 share = Rs. 110
Let no. of shares purchased = n
Then nominal value of n shares = Rs. (100n)
Dividend% = 12%
Dividend = Rs. 1,680
∴ 12% of 100n = Rs. 1680
⟹ $\times$ 100𝑛 = 𝑅𝑠. 1,680
⟹ n = = 140
Then market value of 140 shares = 140 $\times$ 110 = 15,400