Question

Shri Shantilal has purchased 150 shares of FV Rs 100, for MV of Rs 120. Company has paid dividend at 7%. Find the rate of return on his investment.

Answer 1

FV of each share = Rs 100

MV of each share = Rs 120

Number of shares purchased = 150

Sum invested = Number of shares purchased × MV of each share = 150 × 120 = Rs 18,000

Dividend received on each share = 7% of FV of each share = 7% of Rs 100 = $\frac{7}{100}$× 100= Rs 7

Total dividend received = Number of shares purchased × Dividend received on each share = 150 × 7 = Rs 1,050

∴ Rate of return on investment = $\frac{\mathrm{Total}\mathrm{dividend}\mathrm{received}}{\mathrm{Sum}\mathrm{invested}}\times 100\%=\frac{1050}{18000}\times 100\%$ = 5.83%

Thus, the rate of return on investment is 5.83%.