Question

Nisha invests Rs. 15840 in buying shares of nominal value Rs.24 selling at a premium of 10%. The company pays a 15% dividend annually.

Find

(i) The dividend she receives annually, and

(ii) The rate of return from her investment.

Answer 1

Given that,

Face value of the share (F.V.) = ₹ 24

Premium = 10%

∴ The market value of the share (M.V.)

= `24 + (24 xx 10/100)`

= 24 + 2.4

= ₹ 26.4

Dividend = 15%

∴ Annual income on the share = `15/100 xx 24`

= ₹ 3.6

Nisha invests ₹ 15,840 in these shares.

∴ Number of shares bought by Nisha = `" Amount invested"/"Market value of one share"`

= `15840/26.4`

= 600

Annual dividend received by Nisha

= Number of shares × annual income from one share

= 600 × 3.6

= ₹ 2160

Rate of return from the investment

= `"Annual dividend"/"Amount invested" xx 100`

= `2160/15840 xx 100`

= 13.64 %