Question

Salman invests a sum of money in Rs 50 shares, paying 15% dividend quoted at 20% permium. If his annual dividend is Rs 600, calculate :

(i) the number of shares he bought.

(ii) his total investment

(iii) the rate of return on his investment.

Answer 1

(i)
Nominal Value of each share = Rs. 50
Market Value of each share = Rs. 50 + 20% of Rs.50
= 50 +
= 50 + 10
= Rs. 60
Dividend on one share = 15% of Rs.50
=

Number of shares bought =
=
= = 80

(ii)
His total investment =
= (Number of shares) $\times$ (Market Value of one share)
= 80 $\times$ (Rs. 60)
= Rs. 4800

(iii)
Rate of return
= $\times$ 100
=
= 12.5%