Question
Download Solution PDFHow much should a man invest in Rs. 50 shares selling at Rs. 60 to obtain an annual income of Rs. 900, if the dividend declared is 15% ?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
A man needs to invest in Rs. 50 shares selling at Rs. 60 to obtain an annual income of Rs. 900, with a dividend declared at 15%.
Formula used:
Dividend = (Dividend Rate × Face Value of Share)/100
Calculation:
The dividend per share = (15% of Rs. 50)
= (15/100) × 50
= Rs. 7.5 per share
To obtain an annual income of Rs. 900:
Number of shares required = Total annual income / Dividend per share
= 900 / 7.5
= 120 shares
Since the shares are selling at Rs. 60 each:
Investment required = Number of shares × Market Price per share
= 120 × 60
= Rs. 7200
Therefore, the man should invest Rs. 7200.
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