Question

Mr. Amol purchased 50 shares of Face value Rs. 100 when the Market value of the share was Rs. 80. Company had given 20% dividend. Find the rate of return on investment.

Answer 1

Here, MV = Rs. 80, FV = Rs. 100, Number of shares = 50, Rate of dividend = 20%

∴ Sum invested = Number of shares × MV 

= 50 × 80 

= Rs. 4000

Dividend per share = 20% of FV 

= 20/100 × 100 = Rs. 20 

∴ Total dividend of 50 shares = 50 × 20 = Rs. 1000

Now, rate of return = (Total divident) /(sum invested) x 100

= (1000/4000) x 100

= 25%

∴ Rate of return on investment is 25%