Question

Mr.Amol purchased 50 shares of Face Value Rs 100 when the Market value of the share was Rs 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 $1,000$

$\therefore$ Rate of return on investment = (Total dividend received / Sum invested)\times100%

= $\frac{1000}{4000}\times 100=25$%

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