Question

Kabir bought 120 shares of a company with nominal value ₹ 100, available at a premium of ₹ 25. Find:

1. The money invested by Kabir in buying these shares.
2. The rate of dividend, if he received ₹ 1,080 as dividend from these shares after one year.
3. His rate of return.

Answer 1

(a) Given: Number of shares = 120

Nominal value = ₹ 100

Premium = ₹ 25

Market price per share = ₹ 100 + ₹ 25

= ₹ 125

Total money invested by Kabir = Number of shares × Market price per share

= 120 × 125

= ₹ 15,000

(b) Given: Total dividend = ₹ 1080

Let rate of dividend be R.

By formula,

Dividend = `"No. of shares" × "Rate of dividend"/100​ × "N.V. of share"`

1080 = `120 × R/100​ × 100`

1080 = 120 × R

R = `1080/120​`

R = 9%

(c) Given: Investment = ₹ 15,000

Rate of return = `"Total dividend"/"Total investment" xx 100`

= `1080/15000`

= 7.2%

Hence, the rate of return = 7.2%.