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Question
A man buys Rs. 40 shares of a company which pays 10% dividend. He buys the shares at such a price that his profit is 16% on his investment. At what price did he buy each share?
Solution
Face value of each share = Rs. 40
Dividend = 10%
Gain on investment = 10%
∴ Dividend on Rs. 40 = `(40 xx 10)/(100)` = Rs. 4
Now Rs. 16 is interset on the market value = Rs. 100
∴ Market value if interset is Rs. 4
= `(100 xx 4)/(16)` = Rs. 25.
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