Question

Mohan Lal invested ₹ 29040 in 15%, ₹ 100 shares of a company quoted at a premium of 20%.

Calculate:

1. the number of shares bought by Mohan Lal;
2. his annual income from shares; 
3. the percentage return on his investment.

Answer 1

Given:

Investment = ₹ 29,040.

Shares are ₹ 100 (face value) paying 15% dividend.

Shares are quoted at a premium of 20%. 

Market value per share = ₹ 100 + 20% of 100 = ₹ 120.

Step-wise calculation:

1. Number of shares bought = Investment ÷ Market value per share

= 29,040 ÷ 120

= 242 shares

2. Dividend per share = 15% of ₹ 100 

= ₹ 15

Annual income = Number of shares × Dividend per share 

= 242 × 15

= ₹ 3,630

3. Percentage return on investment = (Annual income ÷ Investment) × 100 

= (3,630 ÷ 29,040) × 100

= 0.125 × 100

= 12.5%