Question

Mr.Amol purchased 50 shares of Face Value Rs100 when the Market value of the share was Rs 80. Company had given 20% dividend. Find the rate of return on investment.

Answer 1

FV = Rs 100

MV = Rs 80

Number of shares purchased = 50

Sum invested = Number of shares purchased × MV of each share = 50 × 80 = Rs 4,000

Dividend received on each share = 20% of FV of each share = 20% of Rs 100 = \[\frac{20}{100} \times 100\]  = Rs 20 

Total dividend received = Number of shares purchased × Dividend received on each share = 50 × 20 = Rs 1,000

∴ Rate of return on investment = \[\frac{\text{ Total dividend received } }{\text{ Sum invested} } \] 100  % = \[ \frac{1000}{4000} \] × 100 = 25 %

Thus, the rate of return on investment is 25%.