Question

Rahul purchased 80 shares of FV ₹60 at a premium of ₹20. If the company is paying 15% dividend, then the rate of return on investment is:

• A. 12.25%
• B. 10.25%
• C. 10.75%
• D. 11.25%

Answer 1

The correct option is D 11.25%

Market value = FV + premium = ₹60 + ₹20 = ₹80

Sum invested = Number of shares $\times$ MV = 80 $\times$₹80 = ₹6400

Dividend per share = FV $\times \frac{15}{100}$
= ₹60 $\times \frac{15}{100}$ = ₹9

Total dividend received for 80 shares = 80 $\times$ ₹9 = ₹720

Rate of return = $\frac{Dividendincome}{Suminvested}\times 100$

= $\frac{720}{6400}\times 100=11.25$%

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