A man invests a sum of money in ₹ 100 shares, paying 10% dividend and quoted at 20% premium. If his annual dividend from these shares is ₹ 560, calculate :

(i) his total investment,

(ii) the rate of return on his investment.

Given,

Rate of Dividend = 10%

Annual dividend = ₹ 560

Face Value = ₹ 100

Premium Rate = 20%

Premium = $\dfrac{20}{100} \times 100$ = ₹ 20

Market Value = Face Value + Premium = ₹ 120

(i) By formula,

$\text{Annual income from one share} = \dfrac{\text{Rate of Dividend}}{100} \times \text{Face Value of one share} \\[1em] = \dfrac{10}{100} \times 100 = ₹10 \\[1em] \text{Number of shares} = \dfrac{\text{ Annual income}}{\text{ Annual income from 1 share}} \\[1em] =\dfrac{560}{10} \\[1em] = 56.$

By formula,

Investment = Number of shares × Market value of each share

= 56 × 120

= ₹ 6,720.

Hence, his total investment is ₹ 6,720.

(ii) By formula,

$\text{Percentage return} = \dfrac{\text{Income}}{\text{Investment}} \times 100\%\\[1em] = \dfrac{560}{6720} \times 100\%\\[1em] = \dfrac{25}{3}\% \\[1em] = 8\dfrac{1}{3}\%.$

Hence, the rate of return on his investment is $8\dfrac{1}{3}\%$.