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Mathematics

200 ₹ 20 shares, each available at a discount of 20%, give 10% dividend. The rate of return is :

  1. 12.5%

  2. 15%

  3. 16%

  4. 25%

Shares & Dividends

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Answer

Given,

Dividend = 10%

N.V. = ₹ 20

Discount = 20%

M.V. = N.V. - Discount

= ₹ 20 - 20% of ₹ 20

= ₹ 20 - 20100×20\dfrac{20}{100} \times 20

= ₹ 20 - ₹ 4 = ₹ 16.

Dividend = 10%

Let rate of return/interest be r%.

We know that,

Interest on M.V. = Dividend on N.V.

r% of 16 = 10% of 20

⇒r100×16=10100×20⇒r=10×2016⇒r=20016⇒r=12.5%\Rightarrow \dfrac{r}{100} \times 16 = \dfrac{10}{100} \times 20 \\[1em] \Rightarrow r = \dfrac{10 \times 20}{16} \\[1em] \Rightarrow r = \dfrac{200}{16} \\[1em] \Rightarrow r = 12.5\%

Hence, Option 1 is the correct option.

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