A man buys 400 ten-rupee shares at a premium of ₹2.50 on each share. If the rate of dividend is 8%, find

(i) his investment

(ii) dividend received

(iii) yield.

(i)
Number of shares = 400

Nominal Value per share = ₹10

As the man buys the shares at ₹2.50 premium,

Market Value per share = ₹10 + ₹2.50 = ₹12.50

Total Investment = No. of shares x MV per share
= 400 x 12.5
= 5000

∴ Investment of man = ₹5000

(ii)
Rate of Dividend = 8%

Annual Dividend = No. of shares x Rate of Dividend x Nominal Value per share

$= 400 \times \dfrac{8}{100} \times 10 \\[0.5em] = \bold{₹320}$

∴ Dividend received = ₹320

(iii)
Yield means the rate of return on investment.

$\% \text{Return} = \Big(\dfrac{\text{Annual Inc.}}{\text{Investment}} \times 100\Big)\% \\[0.5em] = \Big(\dfrac{320}{5000} \times 100\Big) \% \\[0.5em] = \Big(\dfrac{32}{5} \Big) \% \\[0.5em] = \bold{6.4\%}$

∴ Yield = 6.4%