A man buys 400, ₹ 10 shares at a premium of ₹ 2.50 per share. If the rate of dividend is 12%, find :

(i) his investment;

(ii) annual dividend received by him;

(iii) the rate of interest received by him on his money.

Given,

Number of shares = 400

Face Value = ₹ 10

Premium = ₹ 2.50

Market Value = Face Value + Premium = ₹ 10 + ₹ 2.50 = ₹ 12.50

Dividend Rate = 12%

(i) By formula,

Investment = Number of shares × Market value

= 400 × 12.50

= ₹ 5,000.

Hence, total investment equals to ₹ 5,000.

(ii) By formula,

Annual dividend = No. of shares × Rate of div. × N.V. of 1 share

= 400 × $\dfrac{12}{100}$ × 10

= ₹ 480.

Hence, the annual dividend received is ₹ 480.

(iii) By formula,

$\text{Rate of interest} = \dfrac{\text{Income}}{\text{Investment}} \times 100\% \\[1em] = \dfrac{480}{5000} \times 100\% \\[1em] = 9.6\%.$

Hence, the rate of interest received is 9.6%.