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Question
Shri Shantilal has purchased 150 shares of FV Rs 100, for MV of Rs 120. Company has paid dividend at 7%. Find the rate of return on his investment.
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Solution
FV of each share = Rs 100
MV of each share = Rs 120
Number of shares purchased = 150
Sum invested = Number of shares purchased × MV of each share = 150 × 120 = Rs 18,000
Dividend received on each share = 7% of FV of each share = 7% of Rs 100 = \[\frac{7}{100}\] × 100 = Rs 7
Total dividend received = Number of shares purchased × Dividend received on each share = 150 × 7 = Rs 1,050
∴ Rate of return on investment = \[\frac{\text{ Total dividend received } }{\text{ Sum invested } } \] x 100 % = \[\frac{1050}{18000}\] x 100 % = 5.83%
Thus, the rate of return on investment is 5.83%.
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