Question

If 50 shares of FV RS. 10 were purchased for MV of Rs. 25. Company declared a 30% dividend on the shares then find (1) Sum investment (2) Dividend received (3) Rate of return.

Answer 1

Hint:To find the solution of this question, we will find the sum of investment using the formula, $ n\times \left( rate \right) $ here ‘n’ represents the number of shares. We will find the dividend per share using the formula, $ FV\times \left( dividend\% \right) $ and we will calculate the rate of return using the formula, $ \dfrac{\text{total dividend received}}{\text{total sum invested}}\times 100 $ .

Complete step-by-step answer:
It is given in the question that there are 50 shares of FV of Rs.10, which were purchased for MV of Rs.25. Company declared a 30% dividend on the shares then we have to find the, (1) Sum investment (2) Dividend received (3) Rate of return.
(1) Now, we know that the sum of investment can be calculated using the formula, $ n\times \text{cost per share} $ . We have an equal to Rs. 50 and cost per share as Rs. 25. Thus, we get the sum of investment = $ 50\times 25=Rs.1250 $ .
So, the sum of investment will be Rs. 1250
(2) Now, we know that the dividend per share can be calculated as, $ FV\times \left( \text{rate of dividend} \right) $ . We have the FV is equal to Rs. 10 and the rate of dividend is equal to 30%, so we get,
Dividend per share = $ 10\times \dfrac{30}{100}=Rs.3 $
Thus, the total dividend received = $ 50\times 3=Rs.150 $ .
(3) Also, we know that the rate of return is calculated using the formula, $ \dfrac{\text{total dividend received}}{\text{total sum invested}}\times 100 $ . Here, we have the total dividend received = Rs. 150 and the total sum invested = Rs. 1250. Therefore, we can write,
Rate of return = $ \dfrac{150}{1250}\times 100\Rightarrow \dfrac{1500}{125}\Rightarrow 12\% $
Thus, the rate of return will be 12%.

Note: It is noted that most of the students make mistakes in the last step while finding the rate of return, they might write the wrong formula like, $ \dfrac{\text{total sum invested}}{\text{total dividend received}}\times 100 $ . But this is wrong. If we don’t use this correct formula, we will get wrong answers. Thus it is recommended to use the correct formulas in this question.