Sum
A company declares a dividend of 11.2% to all its share-holders. If its Rs 60 share is available in the market at a premium of 25%, how much should Rakesh invest, in buying the shares of this company, in order to have an annual income of Rs 1,680?
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Solution
Nominal value of 1 share = Rs 60
Market value of 1 share = Rs 60+ 25% of Rs 60
= Rs 60 + Rs 15 = Rs 75
Let no. of shares purchased = n
Then nominal value of n shares = Rs (60n)
Dividend% = 11.2%
Dividend = Rs 1,680
∴ 11.2% of 60n = Rs 1680
`=> 11.2/100 xx 60"n" = "Rs" 1680 `
`=> "n" = (1680 xx 100)/(11.2 xx 60)= 250`
Then market value of 250 shares = 250 × 75 = Rs 18,750
Concept: Shares and Dividends
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