Question

A company declares a dividend of 11.2% to 14
all its share-holders. If its 60 share is
nilable in the market at a premium of 25%,
how much should Rakesh invest, in buying the
shares of this company, in order to have an
annual income of 1.680 ?​

Answer 1

Nominal value of 1 share = Rs 60

Market value of 1 share = Rs 60+ 25% of Rs 60

= Rs 60 + Rs 15 = Rs 75

Let no. of shares purchased = n

Then nominal value of n shares = Rs (60n)

Dividend% = 11.2%

Dividend = Rs 1,680

∴ 11.2% of 60n = Rs 1680

11.2/100×60N = Rs. 1680

N= 1680 ×100/11.2×60= 250

Then market value of 250 shares =

=250×75= Rs. 18750