Question

Mr. Amol purchased 50 shares of face value 100 when the Market value of the share was 80. Company had given a 20% dividend. Find the rate of return on investment.

Answer 1

Hint: Here we go through by first finding the total sum invested in the market then we find the dividend received on each share to calculate total dividend. Then for finding the rate of return on investment simply divide the total dividend received by the sum invested and then multiply it by 100.

Complete step-by-step answer:
Here in the question it is given that face value of share i.e. FV= Rs.100
And market value of the share i.e. MV= Rs.80
Number of shares purchased =50
Now for finding the total sum that is invested we multiply the number of shares purchased by MV of each share.
I.e. sum invested\[ = 50 \times 80 = Rs.4000\]
Now we have to find dividend received on each share, for finding this we simply take 20% of FV each share
I.e. Dividend received on each share= 20% of FV of each share=20% of Rs.100$ = \dfrac{{20}}{{100}} \times 100 = Rs.20$
Total dividend received = Number of shares purchased$ \times $Dividend received on each share $ = 50 \times 20 = Rs.1000$
$\therefore $ Rate of return on investment$ = \dfrac{{{\text{Total dividend received}}}}{{{\text{Sum invested}}}} \times 100 = \dfrac{{1000}}{{4000}} \times 100 = 25\% $
Thus, the rate of return on investment is 25%.

Note: Whenever we face such type of question in which we have to find rate of profit or loss or return the key concept for solving the question is always try to find separately all the things that we have to use in the question just like in this question separately find the sum invested and the total dividend received to find out the Rate of return on investment.