A man invests Rs. 20,000 in Rs. 80 shares of a company available at a premium of Rs. 20. IF the company pays a dividend of 8%, then find the rate of return on the investment.

Answer

To solve the problem step by step, we will follow the given information and apply the necessary formulas to find the rate of return on the investment.

### Step 1: Identify the given values
- Total investment = Rs. 20,000
- Face value of the share = Rs. 80
- Premium on the share = Rs. 20
- Dividend rate = 8%

### Step 2: Calculate the market value of the share
The market value of the share can be calculated using the formula:
\[ \text{Market Value} = \text{Face Value} + \text{Premium} \]
Substituting the values:
\[ \text{Market Value} = 80 + 20 = 100 \text{ Rs.} \]

### Step 3: Calculate the total number of shares purchased
To find the total number of shares purchased, we use the formula:
\[ \text{Number of Shares} = \frac{\text{Total Investment}}{\text{Market Value per Share}} \]
Substituting the values:
\[ \text{Number of Shares} = \frac{20000}{100} = 200 \text{ shares} \]

### Step 4: Calculate the total dividend received
The total dividend can be calculated using the formula:
\[ \text{Total Dividend} = \text{Number of Shares} \times \text{Face Value} \times \frac{\text{Dividend Rate}}{100} \]
Substituting the values:
\[ \text{Total Dividend} = 200 \times 80 \times \frac{8}{100} = 200 \times 80 \times 0.08 = 1280 \text{ Rs.} \]

### Step 5: Calculate the rate of return
The rate of return can be calculated using the formula:
\[ \text{Rate of Return} = \frac{\text{Total Dividend}}{\text{Total Investment}} \times 100 \]
Substituting the values:
\[ \text{Rate of Return} = \frac{1280}{20000} \times 100 = 6.4\% \]

### Final Answer
The rate of return on the investment is **6.4%**.

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