A dividend of 13 % was declared on ₹ 100 shares selling at a certain price. If the rate of return is 6.5 % ,calculate

(i) the market value of the shares

(ii) the amount to be invested to obtain an annual dividend of ₹ 3900

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Solution

Given that Dividend = 13 % ; N.V = ₹ 100; Rate of return = 6.5 %

M.V x Rate of Return = Dividend % x N.V

M.V $\times$ 6. 5 % = 13 % $\times$ 100
M.V $\times$ $\frac{6.5}{100}$ = $\frac{13}{100}$ $\times$ 100
M.V = $\frac{13}{6.5}$ $\times$ 100
= ₹ 200

ii) Dividend % = 13 % ; N.V = 100
Hence dividend on one share = ₹ 13

To obtain an annual income of ₹ 3900;
We know Annual Income = Dividend on one share x Number of shares
3900 = 13 x Number of shares
Number of shares = $\frac{6500}{13}$
= 300

M.V of one share = ₹ 200 and number of shares = 300
Hence he will have to invest 200 x 300 = ₹ 60,000

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