Question

How much should a man invest in ₹ 25 shares, selling at ₹ 36 to obtain an annual income of ₹ 1500, if the dividend declared is 12%?

[Hint: Suppose he buys x shares. Then, investment = ₹ 36x.

∴ `(25x xx 12/100 xx 1 = 1500)` ⇒ x = 500. Investment = ₹ (36 × 500)]

Answer 1

Given:

Nominal (face) value of each share = ₹ 25

Market (selling) price of each share = ₹ 36

Dividend = 12%

Required annual income = ₹ 1500

Step-wise calculation:

1. Dividend on 1 share = 12% of ₹ 25 

= `12/100 xx 25`

= ₹ 3

2. Number of shares required = `"Total income"/"Dividend per share"` 

= `1500/3` 

= 500 shares

3. Investment = Number of shares × Market price

= 500 × ₹ 36

= ₹ 18,000

The man should invest ₹ 18,000.