Question

A man buys 400, twenty-rupee shares at a premium of Rs. 4 each and receives a dividend of 12%. Find:

1. the amount invested by him.
2. his total income from the shares.
3. percentage return on his money.

Answer 1

Nominal value of 1 share = Rs. 20

Market value of 1 share = Rs. 20 + Rs. 4 = Rs. 24

No. of shares purchased = 400

Nominal value of 400 shares = 400 × 20 = Rs. 8,000

1. Market value of 400 shares = 400 × 24 = Rs. 9,600

2. Dividend% = 12%

Dividend = 12% of Rs. 8000

= `12/100 xx Rs. 8000`

= Rs. 960

3. Percentage return = `"Income"/"Investment" xx 100%` 

= `960/9600 xx 100%`

= 10%