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Question
A man invests Rs. 1,680 in buying shares of nominal value Rs. 24 and selling at 12% premium. The dividend on the shares is 15% per annum. Calculate:
- the number of shares he buys;
- the dividend he receives annually.
Solution
i. Nominal value of 1 share = Rs. 24
Market value of 1 share = Rs. 24 + 12% of Rs. 24
= Rs. 24 + Rs. 2.88
= Rs. 26.88
Total investment = Rs. 1,680
∴ No of shares purchased = `1680/26.88` = 62.5
ii. Nominal value of 62.5 shares = 62.5 × 24
= Rs. 1,500
Dividend = 15% of Rs. 1,500
= Rs. 225
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