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Question
A man invests Rs. 20,020 in buying shares of nominal value Rs. 26 at 10% premium. The dividend on the shares is 15% per annum. Calculate:
- the number of shares he buys.
- the dividend he receives annually.
- the rate of interest he gets on his money.
Solution
Total investment = Rs. 20,020
Nominal value of 1 share = Rs. 26
Market value of 1 share = Rs. 26 + 10% of Rs. 26
= Rs. 26 + Rs. 2.60
= Rs. 28.60
∴ No of shares purchased = `(20020)/28.60` = 700 shares
Nominal value of 700 shares = Rs. 26 × 700 = Rs. 18,200
Dividend% = 15%
Dividend = 15% of Rs. 18,200
= `15/100 xx 18200`
= Rs. 2,730
∴ Income% = `"Income"/"Investment" xx 100%`
= `2730/20020 xx 100%`
= `150/11%`
= `13 7/11%`
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