Question

By investing Rs. 7,500 in a company paying 10 percent dividend, an annual income of Rs. 500 is received. What price is paid for each of Rs. 100 share?

Answer 1

Hint: Here we will first find the actual price of the shares. Then we will divide it with the price of the single share to get the number of shares. Then we will divide the initial amount that was invested by the number of shares to get the price which is paid for each of Rs. 100 share.

Complete step-by-step answer:
It is given that the company pays 10 percent dividend to the person and an annual income of Rs. 500 is received.
Let the actual value of the shares be \[x\].
Now according to the given conditions, we get
\[10\% \] of \[x = 500\]
Now we will solve this to get the actual value of the shares i.e. \[x\]. Therefore, we get
\[ \Rightarrow \dfrac{{10}}{{100}} \times x = 500\]
On cross multiplication, we get
\[ \Rightarrow x = 500 \times 10 = {\rm{Rs}}.5000\]
It is given that the rate of the share is Rs.100. Now we will calculate the number of shares for this value.
Now dividing actual value of the shares by rate of the share, we get
Number of shares \[ = \dfrac{{5000}}{{100}} = 50\]
It is given that the person buys these shares for Rs.7500. Now by dividing this amount by the number of shares to get the price he pays for these shares, we get
Price \[ = \dfrac{{7500}}{{50}} = {\rm{Rs}}.150\]
Hence, the price of Rs.150 is paid for each of Rs. 100 share.

Note: To know which company is more profitable we have to take the rate of return into consideration because this is the factor which gives us the knowledge of profits. High value of the rate of return means that the profit gained is higher. We should know the basic formulas of the dividend per share and rate of return. Term MV is usually termed as market value of the share which shows us the price of the share in the current market. We have to note that while calculating the dividend per share that we have to convert the rate of dividend into the normal form i.e. removing the percent from the dividend rate.