Question

Prashant bought 50 shares of FV Rs 100, having MV Rs 180. Company gave 40% dividend on the shares. Find the rate of return on investment.

Answer 1

FV of each share = Rs 100

MV of each share = Rs 180

Number of shares purchased = 50

Sum invested = Number of shares purchased × MV of each share = 50 × 180 = Rs 9,000

Dividend received on each share = 40% of FV of each share = 40% of Rs 100 = $\frac{40}{100}\times 100$ = Rs 40

Total dividend received = Number of shares purchased × Dividend received on each share = 50 × 40 = Rs 2,000

∴ Rate of return on investment = $\frac{\mathrm{Total}\mathrm{dividend}\mathrm{received}}{\mathrm{Sum}\mathrm{invested}}\times 100\%=\frac{2000}{9000}\times 100\%$ = 22.2%

Thus, the rate of return on investment is 22.2%.