Question

Mr.Amol purchase $50$ shares of face value $100$ when the Market value of the share was $80$. Company had given $20\%$ dividend. Find the rate of return on investment.

Answer 1

FV$=Rs.100$

MV$=Rs.80$

Number of shares purchased $=50$

Sum invested = Number of shares purchased $\times$ MV of each share $=50\times 80=Rs.4,000$

Dividend received on each share $=20$ % of FV of each share $=20$% of Rs. 100 $=\frac{20}{100}\times 100=Rs.20$

Total dividend received = Number of shares purchased $\times$ Dividend received on each share $=50\times 20=Rs.1000$

$\therefore$ Rate of return on investment $=\frac{Total-dividend-received}{Sum-invested}\times 100$% $=\frac{1000}{4000}\times 100$% $=25$%

Thus, the rate of return on investment is $25$%