Salmaan invests a sum of money in ₹50 shares paying 10% dividend quoted at 20% discount. If his annual dividend is ₹600, calculate his rate of return from the investment.
Answer & explanation
Correct answer: option 4
The correct answer is option (4) : 12.5%
Salmaan invests in ₹50 shares paying 10% dividend quoted at 20% discount.
Dividend per share = 10% of ₹50 = ₹5
Total annual dividend = ₹600
Number of shares = 600 ÷ 5 = 120 shares
Market price per share = ₹50 − 20% of ₹50 = ₹40
Total investment = 120 × 40 = ₹4800
Rate of return = (600 ÷ 4800) × 100 = 12.5%