Question

How much should a man invest in Rs. 100 shares selling at Rs. 85 to obtain an annual income of Rs. 1,800; if the dividend declared is 12%? Also, find the percentage return on this investment.

Answer 1

i)  Nominal value of 1 share = Rs. 100
Market value of 1 share = Rs. 85 Let no. of shares purchased = n
Nominal value of n shares = Rs. (100n)
∴ 12% of Rs(100n) = Rs. 1,800

⇒ `12 /100`× 100n = Rs. 1,800

⇒ n = `(1,800 ×100) /(12 ×100)`= 150 shares
 Market value of 150 shares = Rs. 85 × 150 = Rs. 12,750
(ii) Income % = `("Income")/("Investment")`×100%

= `(1,800)/( 12,750)`×100%

= 14.12%.