Question
A man buys 80 shares of face value Rs. 100 each at a
market price of Rs. 160 per share. The company declares a 12% dividend on the face value. What is the rate of return on his investment?Solution
ATQ, Face value of each share = Rs. 100 Number of shares = 80 Total face value = 80 × 100 = Rs. 8,000 Dividend rate = 12% on face value Annual dividend = 12% of 8,000 = (12/100) × 8,000 = Rs. 960 Market price per share = Rs. 160 Total investment = 80 × 160 = Rs. 12,800 Rate of return = (Annual income / Investment) × 100 = (960 / 12,800) × 100 = 7.5% Therefore, the rate of return on his investment is 7.5%
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