Question

Ramesh had bought 90 shares of the company at Rs.150 per share. Calculate the dividend he receives and the percentage of return on his investment.

Answer 1

Hint: The question is related to shares and dividend. Let the nominal value of the share is 100 and solve the question with the help of the nominal value. Use the formula of return of investment that is $\% {\text{ return = }}\dfrac{{income}}{{investment}} \times 100$.

Complete step-by-step answer:
Given that
Number of shares = 90
Nominal value of each share = 100
Rate of dividend = 8%
So, the dividend received by the Ramesh is = $8\% {\text{0f}}100 \times 90$
$ = \dfrac{8}{{100}} \times 100 \times 90$
By solving the above equation, we get
$ = 720$
$\% {\text{ return = }}\dfrac{{income}}{{investment}} \times 100$
First, we have to find the income
${\text{income = No}}{\text{.of share }} \times {\text{ rate of dividend }} \times {\text{nominal value }}$
Put the values in the formula
$income = 90 \times \dfrac{8}{{100}} \times 100$
$ = Rs.720$
Now we have to find the investment
${\text{investment = no}}{\text{.of share}} \times {\text{ market value of 1 share }}$
Put the values in the formula
$investment = 90 \times 150$
$ = 13500$
$\% {\text{ return = }}\dfrac{{income}}{{investment}} \times 100$
Put the values in the above formula
$ = \dfrac{{720}}{{13500}} \times 100$
Solve the above equation. Cancel the numerator by denominator
=$5\dfrac{1}{3}\% $

Hence the percentage of return on investment is $5\dfrac{1}{3}\% $.

Note: Students here get confused between the investment and the income as they put the same value in both places. Solve the question step by step. The most important part is the student must know the difference between the nominal value and the real value of the share. Here the percentage of the return on investment is in mixed fraction. A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders.