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Question
Mr.Amol purchased 50 shares of Face Value Rs100 when the Market value of the share was Rs 80. Company had given 20% dividend. Find the rate of return on investment.
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Solution
FV = Rs 100
MV = Rs 80
Number of shares purchased = 50
Sum invested = Number of shares purchased × MV of each share = 50 × 80 = Rs 4,000
Dividend received on each share = 20% of FV of each share = 20% of Rs 100 = \[\frac{20}{100} \times 100\] = Rs 20
Total dividend received = Number of shares purchased × Dividend received on each share = 50 × 20 = Rs 1,000
∴ Rate of return on investment = \[\frac{\text{ Total dividend received } }{\text{ Sum invested} } \] 100 % = \[ \frac{1000}{4000} \] × 100 = 25 %
Thus, the rate of return on investment is 25%.
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