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Question

Salman invests a sum of money in Rs 50 shares, paying 15% dividend quoted at 20% premium. 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.
[3 MARKS]

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Solution


Each subpart: 1 Mark each

(i) Face value of a share = Rs 50
Premium = 20%
Market value of a share = 50 + 20% of 50
=50+20100×50
=50+10=Rs 60
Annual dividend = Rs 600
Rate of dividend = 15%
Annual dividend = 15% of 50×No.of shares
600=15100×50×No.of shares
No. of shares = 80
(ii) His total investment
= M.V × No. of shares
=60×80=Rs 4800
(iii) Rate of return =DividendInvestment×100
=6004800×100=12.5%

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