A man holds 800 shares of ₹ 100 each of a company paying 7.5% dividend semi-annually.

(i) Calculate his annual dividend.

(ii) If he had bought these shares at 40% premium, what percentage return does he get on his investment ?

(i) Given,

A man holds 800 shares.

Nominal Value (N.V.) of each share = ₹ 100

Dividend paid semi-annually = 7.5%

Dividend paid annually = 7.5% × 2 = 15%

(i) Dividend on each share = 15% of N.V.

= $\dfrac{15}{100} \times 100$ = ₹ 15.

Total dividend = Dividend on each share × No. of shares

= ₹ 15 × 800 = ₹ 12000.

Hence, annual dividend of person = ₹ 12000.

(ii) Given,

The person had bought the shares at 40% premium.

Market Value (MV) = N.V. + Premium = 100 + $\dfrac{40}{100} \times 100$ = 100 + 40 = ₹ 140.

Total investment = M.V. × No. of shares

= 140 × 800 = ₹ 112000.

Rate of return = $\dfrac{\text{Income}}{\text{Investment}} \times 100 = \dfrac{12000}{112000} \times 100 = \dfrac{1200}{112}$ = 10.714 %.

Hence, there is a 10.714% percentage return on investment.