Question

Mr. Raman invests Rs 15,840 in buying shares of face value Rs 24 selling at a premium of 10%. The company pays a 15% dividend annually. Find the rate of return from his investment.

Answer 1

Dear student
$$\begin{gathered} \text{Given that face value of a share=Rs24} \\ \text{And, market value of one share=Rs24+10\% of 24=Rs26.40} \\ \text{Dividend=15\% per annum} \\ \text{No. of shares=}\frac{\mathrm{Total}\mathrm{investment}}{\mathrm{market}\mathrm{value}\mathrm{of}\mathrm{one}\mathrm{share}}=\frac{15840}{26.4}=600 \\ \mathrm{Dividend}\mathrm{per}\mathrm{share}=\mathrm{Rs}24\times \frac{15}{100}=\mathrm{Rs}3.6 \\ \mathrm{The}\mathrm{annual}\mathrm{dividend}=\mathrm{Dividend}\mathrm{per}\mathrm{share}\times \mathrm{Number}\mathrm{of}\mathrm{share}=\mathrm{Rs}3.6\times 600=\mathrm{Rs}2160 \\ \mathrm{So},\mathrm{profit}\%=\frac{\mathrm{Rs}2160\times 100}{15840}=13.63\% \end{gathered}$$
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