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Question
A man buys 400, twenty-rupee shares at a discount of 20% and receives a return of 12% on his money. Calculate:
- the amount invested by him.
- the rate of dividend paid by the company.
Solution
Nominal value of 1 share = Rs. 20
Market value of 1 share = Rs. 20 – 20% of Rs. 20
= Rs. 20 – Rs. 4
= Rs. 16
No. of shares purchased = 400
Nominal value of 400 shares = 400 × 20 = Rs. 8,000
i. Market value of 400 shares = 400 × 16 = Rs. 6,400
ii. Return% = 12%
Income = 12% of Rs. 6,400
= `12/100 xx Rs. 6400`
= Rs. 768
Dividend% = `"Income"/"Nominal value" xx 100%`
= `768/8000 xx 100%`
= 9.6%
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