5. A person buys 60 shares of a company of FV
10 at MV = 15. The company declares 12%
dividend. After receiving dividend, he sells the
shares at MV 20. He invests the proceed to buy
shares of another company at MV = 12 of
FV = 5. The company declares 8% dividend.
What is the actual difference in the dividend
received by the person in two companies?
Answers
Answer:
The actual difference in dividend earned = Rs.32
Step-by-step explanation:
First Transaction
60 shares of FV 10 are purchased at MV of 15
Dividend rate = 12%
Dividend per share = Dividend rate * FV
= (12/100)*10
= 0.12*10 = 1.2
Dividend per share = Rs.1.20
Total dividend earned = Dividend per share * No.of shares
= 1.20 * 60
= 72
Total dividend earned = Rs.72 ....(i)
Second Transaction
All 60 shares are sold at Rs.20 per share
Amount earned on this transaction = Rs.(60*20) = Rs.1,200
The person buys shares of another company at MV = 12.
=> No. of shares purchased = 1200/12 = 100
The company declared a dividend of 8%
=> Dividend per share = Dividend rate * FV
= (8/100)*5 = 0.40
Total dividend earned = Dividend per share * No.of shares
= 0.40*100
= 40
Total dividend earned on the second investment = Rs.40 .........(ii)
=> The persons earns more dividend on the first investment.
The difference in dividend earned is:
(i) - (ii) = Rs.72 - Rs.40 = Rs.32
The actual difference in dividend earned = Rs.32
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