Question

A man holds 800 shares of 100 each of a company paying 7.5% dividend semi-annually
(i) Calculate his annual dividend.
(ii) If he had bought these shares at 40% premium, what percentage return does he get on
his investment ?​

Answer 1

Answer:

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Step-by-step explanation:

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Answer 2

(i) His annual dividend was 12,000 Rs.

(ii) His return percentage on his investment was 10.714%

Step-by-step explanation:

A man holds number of shares = 800 Rs.

Face Value (FV) of each share = 100 Rs.

Dividend paid semi-annually = 7.5%

Dividend paid annually = 7.5% × 2 = 15%

(i) His annual dividend = (15% × 100) × 800

                                     = (0.15 × 100) × 800

                                     = 15 × 800

                                    = 12,000 Rs.

(ii) He had bought these shares at 40% premium.

Market Value (MV) = FV + Premium

Total investment = $800\times 100\times(1+\frac{40}{100} )$

                               = 80000 × 1.40

                              = 1,12,000

Rate of return =  $\frac{income}{investment}\times 100$

                       = $\frac{12,000}{1,12,000} \times 100$

                       = 10.714%

(i) His annual dividend was 12,000 Rs.

(ii) His return percentage on his investment was 10.714%

                                     

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