Question

A man invested in a company paying 12% dividend on its share. If the percentage return on his investment is 10%, then the shares are ______.

Options

• at par

• below par

• above par

• cannot be determined

Answer 1

A man invested in a company paying 12% dividend on its share. If the percentage return on his investment is 10%, then the shares are above par.

Explanation:

Given, Dividend = 12%

Return on investement = 10%

Now,

Return on investment = `"Dividend"/"Market" xx 100`

`10 = 12/"Market" xx 100`

Market Price = `(12 xx 100)/10`

= 120

Since the market price is greater than the face value (which is usually ₹100) the share is above par.