A dividend of 9% was declared on a share of FV Rs 100 at a certain price. If the rate of return is 7.5% , calculate MV of the share. How many shares would a person get on investing Rs 8400?

Sub Grade: 9

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answer is A.

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Detailed Solution

We have face value of share [FV] =100 dividend = 9%
Rate of return = 7.5%
Annual income from share = 9/100 x 100 = ₹ 9
Rate of return = Annual income/ Market price x 100
⇒ 7.5 = 9/Market price x 100
⇒ market price = 900/7.5 = ₹ 120
Then market price of share will be ₹ 120
Let x be the amount be invested to obtain annual dividend of ₹ 630
⇒ 7.5 % of x is ₹ 630.
⇒ 7.5/100 X x= 360 ⇒ x=63x100/7.5 ⇒ x=8400
Hence, dividend = dxn , where n = number of shares
⇒ 630 = (9)xn
⇒ n= 630/9 = 70
Hence, option 1 is correct.

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