₹ 600 shares of a company are available at a discount of 20%. If the company pays a dividend of 20%, the rate of return is :

1. 16%

2. 25%

3. 10%

4. 12.5%

Given,

N.V. of share = ₹ 600

Discount = 20%

M.V. = N.V. - Discount

= ₹ 600 - 20%

= ₹ 600 - $\dfrac{20}{100} \times 600$

= ₹ 600 - ₹ 120 = ₹ 480.

Dividend = 20%

Let rate of return be r%.

We know that,

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

r% of ₹ 480 = 20% of ₹ 600

$\Rightarrow \dfrac{r}{100} \times 480 = \dfrac{20}{100} \times 600 \\[1em] \Rightarrow 4.8r = 120 \\[1em] \Rightarrow r = \dfrac{120}{4.8} \\[1em] \Rightarrow r = 25\%.$

Hence, Option 2 is the correct option.