Question

Salman invests a sum of money in Rs.50 shares, paying 15% dividend quoted at 20% premium. If his annual dividend is Rs.600, calculate his total investment

Answer 1

Hint-First try dividend on 1 share and proceed further and we can calculate the actual total investment which is needed

Complete step-by-step answer:
Given that the nominal value of 1 share=Rs.50
Given that the person is paying 15% dividend
So, the dividend on 1 share=$\dfrac{{15}}{{100}} \times 50 = Rs7.50$
Total annual dividend of Salman =Rs.600
So, we will calculate from this total dividend how many shares he can buy
So, the number of shares bought by Salman=$\dfrac{{600}}{{7.50}} = 80$
Now, given that the premium which he obtains on a single share=20%
So, we can write the premium on 1 share $ = \dfrac{{20}}{{100}} \times 50 = Rs.10$
So, from this, we can write that the market value of 1 share=Nominal value of 1 share+ Premium on 1 share
So, the market value of 1 share would be =50+10=Rs.60
So, the total investment which a person has to make for 80 shares=$80 \times 60 = 4800$ =Rs.4,800
Note: When calculating the market value on 1 share, make sure to add up the nominal value and the premium on 1 share, do not just find the premium and leave the answer as it is