Mr Satendra holds 1500, Rs 100 shares of a company paying 15% dividend annually quoted at 30% premium. Calculate rate of return on his investment.
Answer & explanation
Correct answer: option 2
The correct answer is option (2) : $11\frac{7}{3}$%
1 share of ₹100 = 15% of $₹100= ₹ 15$
Total annual dividend earned $= ₹(15×1500) = ₹ 22500$
Market value of 1 share of $₹ 100= 100 \left(1+\frac{30}{100}\right)= ₹ 130$
Market value of 1500 shares of $₹100= ₹(130×1500)= ₹195000$
So, rate of return $=\frac{22500}{19500}×100$%= $11\frac{7}{3}$%