John invests ₹7,200 in MojoRojo Inc, paying 10% per annum when its ₹20 shares can be bought for ₹16. His annual income, and percentage return on his investment are respectively ____.

₹900, 12.5%

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₹902, 12.8%

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₹920, 12.1%

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₹925, 12.6%

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Solution

The correct option is A
₹900, 12.5%

The total investment made by John = ₹7200
Nominal Value of the share = ₹20
Market Value of the share = ₹16
No of shares bought = $\frac{7200}{16} = 450$
Total Income = (Number of shares) $\times$ (Market Value of each share) $\times$ (rate of dividend)

$\Rightarrow 450 \times 20 \times 10 = ₹ 900$
So, % of return on Investment is:-

$(\frac{Total income}{Total Investment}) \times 100 = (\frac{900}{7200}) \times 100 = 12.5 %$

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