Question

A man buys Rs. 40 shares of a company which pays 10% dividend. He buys the shares at such a price that his profit is 16% on his investment. At what price did he buy each share?

Answer 1

Face value of each share = Rs. 40

Dividend = 10%

Gain on investment = 10%

∴ Dividend on Rs. 40 = `(40 xx 10)/(100)`

= Rs. 4

Now Rs. 16 is interset on the market value = Rs. 100

∴ Market value if interset is Rs. 4

= `(100 xx 4)/(16)` 

= Rs. 25