Question

A dividend of 12% was declared on Rs. 150 shares selling at a certain price. If the rate of return is 10%, calculate:

1. the market value of the shares.
2. the amount to be invested to obtain an annual dividend of Rs. 1,350.

Answer 1

1. Nominal value of 1 share = Rs. 150

Dividend% = 12%

Dividend on 1 share = 12% of Rs. 150

= `12/100 xx Rs. 150`

= Rs. 18

Let market value of 1 share = Rs. y

Return% = 10%

10% of Rs. (y) = Rs. 18

⇒ `10/100 xx y = Rs. 18`

⇒ y = Rs. 180

2. When dividend is Rs. 18, then investment is Rs. 180

 When dividend is Rs. 1,350, then investment

= `180/18 xx Rs. 1350`

= Rs. 13,500