Question

A man invests Rs. 1,680 in buying shares of nominal value Rs. 24 and selling at 12% premium. The dividend on the shares is 15% per annum. Calculate:

1. the number of shares he buys;
2. the dividend he receives annually.

Answer 1

i. Nominal value of 1 share = Rs. 24

Market value of 1 share = Rs. 24 + 12% of Rs. 24

= Rs. 24 + Rs. 2.88

= Rs. 26.88

Total investment = Rs. 1,680

∴ No of shares purchased = `1680/26.88` = 62.5

ii. Nominal value of 62.5 shares = 62.5 × 24

= Rs. 1,500

Dividend = 15% of Rs. 1,500

= Rs. 225