Question

A man bought ₹200 shares of a company at 25% premium. If he received a return of 5% on his investment. Find the:

1. market value 
2. dividend percent declared 
3. number of shares purchased, if annual dividend is ₹1000.

Answer 1

(a) Market value of one share = Face value + Premium

= ₹200 + 25% of ₹200

= ₹200 + ₹50 = ₹250

(b) Total investment=Number of shares × Market value of one share

= 200 × ₹250 = ₹50,000

Return = 5% of total investment.

Rate of return on investment

= `("Total dividend"/"Investment") × 100`

5 = `"Total dividend"/"50,000" × 100`

Total dividend = ₹2,500

Dividend percent

= `"Total dividend"/("No. of share" × "Face Value")× 100`

= `(2,500)/(200 × 200)` × 100

= `25/4`

= 6.25%

(c) Given the annual dividend is 1,000

Dividend per share = `"Total dividend"/"Number of share"`

= `(2,500)/200 = ₹ 12.5`

Number of shares = `"Annual dividend"/"Dividend per share"`

= `(₹1,000)/₹12.5`

= 80 shares