Salman invests a sumof money in Rs 50 shares, paying 15% dividend quoted at 20% premium. If his annual dividend is Rs 600, calculate :
(iii) the rate of return on his investment.

Answer

To solve the problem step by step, we will follow the outlined process to find the rate of return on Salman’s investment.

### Step 1: Understand the given information
- **Nominal Value of Shares (Face Value)** = Rs 50
- **Dividend Rate** = 15%
- **Premium** = 20%
- **Annual Dividend** = Rs 600

### Step 2: Calculate the Market Value of the Shares
The market value (MV) of a share is calculated as follows:
\[ \text{Market Value} = \text{Nominal Value} + \text{Premium} \]
The premium can be calculated as:
\[ \text{Premium} = \text{Nominal Value} \times \frac{\text{Premium Percentage}}{100} = 50 \times \frac{20}{100} = 10 \]
Thus, the market value is:
\[ \text{Market Value} = 50 + 10 = Rs 60 \]

### Step 3: Calculate the Number of Shares
The annual dividend is given by the formula:
\[ \text{Annual Dividend} = \text{Number of Shares} \times \text{Dividend Rate} \times \text{Nominal Value} \]
Rearranging to find the number of shares:
\[ \text{Number of Shares} = \frac{\text{Annual Dividend}}{\text{Dividend Rate} \times \text{Nominal Value}} \]
Substituting the known values:
\[ \text{Number of Shares} = \frac{600}{\frac{15}{100} \times 50} = \frac{600}{7.5} = 80 \]

### Step 4: Calculate the Total Investment
The total investment is calculated as:
\[ \text{Total Investment} = \text{Number of Shares} \times \text{Market Value} \]
Substituting the values:
\[ \text{Total Investment} = 80 \times 60 = Rs 4800 \]

### Step 5: Calculate the Rate of Return
The rate of return can be calculated using the formula:
\[ \text{Rate of Return} = \left(\frac{\text{Annual Dividend}}{\text{Total Investment}}\right) \times 100 \]
Substituting the values:
\[ \text{Rate of Return} = \left(\frac{600}{4800}\right) \times 100 = 12.5\% \]

### Final Answer
The rate of return on Salman’s investment is **12.5%**.

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