Question

A dividend of 9% was declared on Rs.100 shares selling at a certain price. If the rate of return is 7.5%, calculate: (i) the market value of the shares, (ii) the amount to be invested, to obtain an annual dividend of Rs.1260.

Answer 1

Answer:

dividend = 9%

Face value = Rs 100 = FV

return = 7.5 % = r%

(i) FV * d% = MV * r%

100 * 9 = MV * 7.5

==> Market value = 900 / 7.5 = Rs 120

(ii)dividend = Rs 630

dividend % = 7.5 %

Sum invested = 630/7.5 * 100 = Rs 8,400