Question

A man buys 400, twenty-rupee shares at a discount of 20% and receives a return of 12% on his money. Calculate:

1. the amount invested by him.
2. the rate of dividend paid by the company.

Answer 1

Nominal value of 1 share = Rs. 20

Market value of 1 share = Rs. 20 – 20% of Rs. 20

= Rs. 20 – Rs. 4

= Rs. 16

No. of shares purchased = 400

Nominal value of 400 shares = 400 × 20 = Rs. 8,000

i. Market value of 400 shares = 400 × 16 = Rs. 6,400

ii. Return% = 12%

Income = 12% of Rs. 6,400

= `12/100 xx "Rs." 6400`

= Rs. 768

Dividend% = `"Income"/"Nominal value" xx 100%`

= `768/8000 xx 100%`

= 9.6%