Question

How much should a man invest in Rs. 100 shares selling at Rs. 110 to obtain an annual income Rs. 1,680, if the dividend declared is 12%?

Answer 1

Nominal value of 1 share = Rs. 100

Market value of 1 share = Rs. 110

Let no. of shares purchased = n

Then nominal value of n shares = Rs. (100n)

Dividend% = 12%

Dividend = Rs. 1,680

∴ 12% of 100n = Rs. 1,680

`=> 12/100 xx 100n` = Rs. 1,680

`=> n = (1680 xx 100)/(12 xx 100) = 140`

Then market value of 140 shares = 140 × 110 = Rs. 15,400