Question

A man invests Rs. 20,020 in buying shares of nominal value Rs. 26 at 10% premium. The dividend on the shares is 15% per annum. Calculate:

1. the number of shares he buys.
2. the dividend he receives annually.
3. the rate of interest he gets on his money.

Answer 1

Total investment = Rs. 20,020

Nominal value of 1 share = Rs. 26

Market value of 1 share = Rs. 26 + 10% of Rs. 26

= Rs. 26 + Rs. 2.60

= Rs. 28.60

∴ No of shares purchased = `(20020)/28.60` = 700 shares

Nominal value of 700 shares = Rs. 26 × 700 = Rs. 18,200

Dividend% = 15%

Dividend = 15% of Rs. 18,200

= `15/100 xx 18200`

= Rs. 2,730

∴ Income%  = `"Income"/"Investment" xx 100%`

= `2730/20020 xx 100%`

= `150/11%`

= `13 7/11%`