#### Question

A company declares a dividend of 11.2% to all its share-holders. If its Rs 60 share is available in the market at a premium of 25%, how much should Rakesh invest, in buying the shares of this company, in order to have an annual income of Rs 1,680?

#### Solution

Nominal value of 1 share = Rs 60

Market value of 1 share = Rs 60+ 25% of Rs 60

= Rs 60 + Rs 15 = Rs 75

Let no. of shares purchased = n

Then nominal value of n shares = Rs (60n)

Dividend% = 11.2%

Dividend = Rs 1,680

∴ 11.2% of 60n = Rs 1680

`=> 11.2/100 xx 60"n" = "Rs" 1680 `

`=> n = (1680 xx 100)/(11.2 xx 60)= 250`

Then market value of 250 shares = 250 × 75 = Rs 18,750

Is there an error in this question or solution?

Solution A Company Declares a Dividend of 11.2% to All Its Share-holders. If Its Rs 60 Share is Available in the Market at a Premium of 25%, How Much Should Rakesh Invest, in Buying the Shares of this Concept: Shares and Dividends.