Question

Bhargav buys 400, twenty-dollar shares at a premium of Rs. 4 each and receives a dividend of 12%.

Find:

(i) The amount invested by Bhargav

(ii) His total income from the shares.

(iii) Percentage return on his money.

Answer 1

Given that,

Face value of the shares (F.V.) = ₹ 20

Premium = ₹ 4

∴ The market value of the shares (M.V.) = ₹ 24

Dividend = 12 %

∴ Annual income from the share = `12/100 xx 20`

= ₹ 2.4

Bhargav buys 400 shares

i.  The amount invested by Bhargav

= number of shares × market value

= 400 × 24 = ₹ 9600

ii. Bhargav’s income from the shares

= number of shares  × annual income from one share

= 400 × 2.4 = ₹ 960

iii. Percentage return on Bhargav’s money

= `"Total annual income"/"Total amount invested" xx 100`

= `960/9600 xx 100`

= 10%

∴ Bhargav gets 10% as the rate of return on his money.