Question

₹ 600 shares of a company are available at a discount of 20%. If the company pays a dividend of 20%, the rate of return is ______.

Options

• 16%

• 25%

• 10%

• 12.5%

Answer 1

₹ 600 shares of a company are available at a discount of 20%. If the company pays a dividend of 20%, the rate of return is 25%.

Explanation:

Suppose the rate of return = x%

Face value of one share = ₹ 600

Market value of one share

= F.V of one share – Discount

= 600 – 20% of ₹ 600

= `600 - (20/100 xx 600)`

= ₹ 480

Return on M.V = Dividend on F.V

`\implies` x% of ₹ 480 = 20% of ₹ 600

`\implies x/100 xx 480 = 20/100 xx 600 = 120`

`\implies x = 120 xx 100/480`

= 25