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Question
A dividend of 12% was declared on Rs. 150 shares selling at a certain price. If the rate of return is 10%, calculate:
- the market value of the shares.
- the amount to be invested to obtain an annual dividend of Rs. 1,350.
Solution
1. Nominal value of 1 share = Rs. 150
Dividend% = 12%
Dividend on 1 share = 12% of Rs. 150
= `12/100 xx Rs. 150`
= Rs. 18
Let market value of 1 share = Rs. y
Return% = 10%
10% of Rs. (y) = Rs. 18
⇒ `10/100 xx y = Rs. 18`
⇒ y = Rs. 180
2. When dividend is Rs. 18, then investment is Rs. 180
When dividend is Rs. 1,350, then investment
= `180/18 xx Rs. 1350`
= Rs. 13,500
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