Michael buys shares of face value Rs. 500 of a company which pays 10% dividend. At what price did he buy each share from the market if his profit is 20% on his investment?

150

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250

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350

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450

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Solution

The correct option is A 250
Let the market value of each share be x.
The dividend is calculated on nominal value.
The dividend on one share = 10% of Rs. 500 = Rs. 50.
Therefore, he earned Rs. 50 on an investment of x.
A profit of 20% on $x = \frac{20}{100} \times x = 50$
$x = R s . 250$
Therefore, Michael bought each share at $R s .250$ from the market.

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