###### Exercise : Chapter 3 Shares and Dividends Exercise 3B MCQ Questions and Answers

**1. **
A man buys 75, ₹ 100 shares of a company which pays 9 percent dividend. He buys shares at such a price that he gets 12 percent of his money. At what price did he buy the shares ?

**Solution :**

Nominal value of 1 share = ₹ 100

Nominal value of 75 shares = 100 x 75 = ₹ 7500

Dividend % = 9%

∴ Dividend = 9% of ₹ 7500

= 9/100 x 7500 = ₹ 675

Let market price of 1 share = ₹ 1 y

Then market price of 75 shares = ₹ 75 y

Profit % on investment = 12%

12% of 75y = ₹ 657

⇒ 12/100 x 75y = ₹ 657

⇒ y = ₹ 75

**2. **
By purchasing ₹ 25 gas shares for ₹ 40 each, a man gets 4 percent profit on his investment. What rate percent is the company paying? What is his dividend if he buys 60 shares?

**Solution :**

Nominal value of 1 share = ₹ 25

Market value of 1 share = ₹ 40

Profit% on investment = 4%

Then profit on 1 share = 4% of ₹ 40= ₹ 1.60

∴ Dividend% = 1/}25 } × 100% = 6.4%

No. of shares purchased= 60

Then dividend on 60 shares = 60 × ₹ 1.60 = ₹ 96

**3. **
Hundred rupee shares of a company are available in the market at a premium of ₹ 20. Find the rate of dividend given by the company, when a man’s return on his investment is 15%.

**Solution :**

Nominal value of 1 share = ₹ 100

Market value of 1 share = ₹ 100 + ₹ 20 = ₹ 120

Profit% on investment of 1 share =15%

Then profit= 15% of ₹ 120 = ₹ 18

∴ Dividend% = 18/100 × 100% = 18%

**4. **
₹ 50 shares of a company are quoted at a discount of 10%. Find the rate of dividend given by the company, the return on the investment on these shares being 20 percent.

**Solution :**

Nominal value of 1 share = ₹ 50

Market value of 1 share = ₹ 50 – 10% of ₹ 50

= ₹ 50 – ₹ 5 = ₹ 45

Profit % on investment = 20%

Then profit on 1 share = 20% of ₹ 45 = ₹ 9

∴ Dividend% = 9/50 × 100% = 18%

**5. **
A company declares 8 percent dividend to the share holders. If a man receives ₹ 2,840 as his dividend, find the nominal value of his shares.

**Solution :**

Dividend% = 8%

Dividend = ₹ 2,840

Let nominal value of shares = ₹ y

then 8% of y = ₹ 2,840

⇒ 8/100 × y = ₹ 2,840

⇒ y = ₹ 35000

**6. **
How much should a man invest in ₹ 100 shares selling at ₹ 110 to obtain an annual income of ₹ 1,680, if the dividend declared is 12%?

**Solution :**

Nominal value of 1 share = ₹ 100

Market value of 1 share = ₹ 110

Let no. of shares purchased = n

Then nominal value of n shares = ₹ (100n)

Dividend% = 12%

Dividend = ₹ 1,680

∴ 12% of 100n = ₹ 1,680

⇒ 12/100 x 100n = ₹ 1,680

⇒ n = (1,680 x 100)/(12 x 100) = 140

Then market value of 140 shares= 140 × 110 = ₹ 15,400

**7. **
A company declares a dividend of 11.2% to all its share-holders. If its ₹ 60 share is available in the market at a premium of 25%, how much should Rakesh invest, in buying the shares of this company, in order to have an annual income of ₹ 1,680?

**Solution :**

Nominal value of 1 share = ₹ 60

Market value of 1 share = ₹ 60+ 25% of ₹ 60

= ₹ 60 + ₹ 15 = ₹ 75

Let no. of shares purchased = n

Then nominal value of n shares = ₹ (60n)

Dividend% = 11.2%

Dividend = ₹ 1,680

∴ 11.2% of 60n = ₹ 1,680

⇒ 11.2/100 x 60n = ₹ 1,680

⇒ n = (1,680 x 100)/(11.2 x 60) = 250

Then market value of 250 shares = 250 × 75 = ₹ 18,750

**8. **
A man buys 400, twenty-rupee shares at a premium of ₹ 4 each and receives a dividend of 12%. Find:

(i) the amount invested by him.

(ii) his total income from the shares.

(iii) percentage return on his money.

**Solution :**

Nominal value of 1 share = ₹ 20

Market value of 1 share = ₹ 20 + ₹ 4 = ₹ 24

No. of shares purchased = 400

Nominal value of 400 shares = 400 × 20 = ₹ 8,000

(i) Market value of 400 shares = 400 × 24 = ₹ 9,600

(ii) Dividend % = 12%

Dividend = 12% of ₹ 8000

= 12/100 x ₹ 8000 = ₹ 960

(iii)

∴ Percentage return = (income/investment) x 100 %

= 960/9600 x 100 % = 10 %

**9. **
A man buys 400, twenty-rupee shares at a discount of 20% and receives a return of 12% on his money. Calculate:

(i) the amount invested by him.

(ii) the rate of dividend paid by the company.

**Solution :**

Nominal value of 1 share = ₹ 20

Market value of 1 share = ₹ 20 – 20% of ₹ 20

= ₹ 20 – ₹ 4 = ₹ 16

No. of shares purchased = 400

Nominal value of 400 shares = 400 x 20 = ₹ 8,000

(i) Market value of 400 shares = 400 x 16 = ₹ 6,400

(ii) Return%= 12%

Income = 12% of ₹ 6,400

= 12/100 x 6400 = ₹ 768

Dividend % = (Income/Nominal value) x 100%

= 768/8000 x 100% = 9.6%

**10. **
A company, with 10,000 shares of ₹ 100 each, declares an annual dividend of 5%.

(i) What is the total amount of dividend paid by the company?

(ii) What should be the annual income of a man who has 72 shares in the company?

(iii) If he received only 4% of his investment, find the price he paid for each share.

**Solution :**

Nominal value of 1 share = ₹ 100

Nominal value of 10,000 shares = 10,000 x ₹ 100 = ₹ 10,00,000

(i) Dividend% = 5%

Dividend = 5% of ₹ 10,00,000

= 5/100 × 10,00,000 = ₹ 50,000

(ii) Nominal value of 72 shares= ₹ 100 x 72 = ₹ 7,200

Dividend = 5% of ₹ 7,200

= 5/100 × 7,200 = ₹ 360

(iii) Let market value of 1 share = ₹ y

Then market value of 10,000 shares = ₹ (10,000y)

Return% = 4%

then 4% of ₹ 10,000y = ₹ 50,000

⇒ 4/100 × 10,000y = ₹ 50,000

⇒ y = ₹ 125

**11. **
A lady holds 1800, ₹ 100 shares of a company that pays 15% dividend annually. Calculate her annual dividend. If she had bought these shares at 40% premium, what is the return she gets as percent on her investment. Give your answer to the nearest integer.

**Solution :**

Nominal value of 1 share = ₹ 100

Market value of 1 share = ₹ 100 + 40% of ₹ 100

= ₹ 100 + ₹ 40 = ₹ 140

No. of shares purchased = 1800

Nominal value of 1800 shares = 1800 × 100 = ₹ 1,80,000

Market value of 1800 shares= 1800 × 140 = ₹ 2,52,000

(i)Dividend% = 15%

Dividend = 15% of ₹ 1,80,000

= 15/100 x 180000 = ₹ 27,000

(ii)

∴ Return % = (Income/Nominal value) x 100%

= (27000/252000) x 100% = 10.7 % = 11%

Question 12.

A man invests ₹ 11,200 in a company paying 6 percent per annum when its ₹ 100 shares can be bought for ₹ 140. Find:

(i) his annual dividend

(ii) his percentage return on his investment.

Solution:

Nominal value of 1 share = ₹ 100

Market value of 1 share = ₹ 140

Total investment = ₹ 11,200

No of shares purchased = 11/ 140 } = 80 shares

Then nominal value of 80 shares= 80 × 100= ₹ 8,000

(i) Dividend% = 6%

Dividend = 6% of ₹ 8,000

= 6/100 x 8000 = ₹ 480

(ii) Return % = (Income/Nominal value) x 100%

= 480/11200 x 100 %

= 4.29 %

**12. **
Mr. Sharma has 60 shares of nominal value ₹ 100 and decides to sell them when they are at a premium of 60%. He invests the proceeds in shares of nominal value ₹ 50, quoted at 4% discount, and paying 18% dividend annually. Calculate :

(i) the sale proceeds

(ii) the number of shares he buys and

(iii) his annual dividend from the shares.

**Solution :**

1st case

Nominal value of 1 share = ₹ 100

Nominal value of 60 shares = ₹ 100 × 60= ₹ 6,000

Market value of 1 share = ₹ 100 + 60% of ₹ 100

= ₹ 100+ ₹ 60 = ₹ 160

Market value of 60 shares = ₹ 160 × 60 = ₹ 9,600 Ans.

(ii) Nominal value of 1 share = ₹ 50

Market value of 1 share= ₹ 50 – 4% of ₹ 50

= ₹ 50 – ₹ 2 = ₹ 48

No of shares purchased = 9/ 48 } = 200 shares

(iii) Nominal value of 200 shares = ₹ 50 × 200 = ₹ 10,000

Dividend% = 18%

Dividend = 18% of ₹ 10,000

= 18/100 × 10,000 = ₹ 1800

**13. **
A company with 10,000 shares of nominal value ₹ 100 declares an annual dividend of 8% to the share-holders.

(i) Calculate the total amount of dividend paid by the company.

(ii) Ramesh had bought 90 shares of the company at ₹ 150 per share. Calculate the dividend he receives and the percentage of return on his investment.

**Solution :**

(i) Nominal value of 1 share = ₹ 100

Nominal value of 10,000 shares = ₹ 100 × 10,000 = ₹ 10,00,000

Dividend% = 8%

Dividend = 8% of ₹ 10,00,000

= 8/100 × 10,00,000 = ₹ 80,000

(ii) Market value of 90 shares = ₹ 150 × 90 = ₹ 13,500

Nominal value of 90 shares = ₹ 100 × 90 = ₹ 9,000

Dividend = 8% of ₹ 9,000

= 8/100 × 9,000 = ₹ 720

(iii)

Return % = (Income/Nominal value) x 100%

= 720/13500 x 100 %

= 5 1/3 %

**14. **
Which is the better investment :

16% ₹ 100 shares at 80 or 20% ₹ 100 shares at 120?

**Solution :**

1st case

16% of ₹ 100 shares at 80 means;

Market value of 1 share = ₹ 80

Nominal value of 1 share = ₹ 100

Dividend = 16%

Income on ₹ 80= 16% of ₹ 100 = ₹ 16

Income on ₹ 1 = 16/80 = ₹ 0.20

2nd case

20% of ₹ 100 shares at 120 means;

Market value of 1 share = ₹ 120

Nominal value of 1 share = ₹ 100

Dividend = 20%

Income on ₹ 120 = 20% of ₹ 100= ₹ 20

Income on ₹ 1 = 20/120 = ₹ 0.17

Then 16% ₹ 100 shares at 80 is better investment.

**15. **
A man has a choice to invest in hundred-rupee shares of two firms at ₹ 120 or at ₹ 132. The first firm pays a dividend of 5% per annum and the second firm pays a dividend of 6% per annum. Find:

(i) which company is giving a better return.

(ii) if a man invests ₹ 26,400 with each firm, how much will be the difference between the annual returns from the two firms.

**Solution :**

(i) 1st firm

Market value of 1 share = ₹ 120

Nominal value of 1 share = ₹ 100

Dividend = 5%

Income on ₹ 120 = 5% of ₹ 100 = ₹ 5

Income on ₹ 1 = 5/120 = ₹ 0.041

2nd firm

Market value of 1 share = ₹ 132

Nominal value of 1 share = ₹ 100

Dividend = 6%

Income on ₹ 132 = 6% of ₹ 100 = ₹ 6

Income on ₹ 1 = 6/132 = ₹ 0.045

Then investment in second company is giving better return.

(ii) Income on investment of ₹ 26,400 in fi₹ t firm

= 5/120 × 26,400 = ₹ 1,100

Income on investment of ₹ 26,400 in second firm

= 6/132 × 26,400 = ₹ 1,200

∴ Difference between both returns = ₹ 1,200 – ₹ 1,100 = ₹ 100

**16. **
A man bought 360, ten-rupee shares of a company, paying 12% per annum. He sold the shares when their price rose to ₹ 21 per share and invested the proceeds in five-rupee shares paying 4.5 percent per annum at ₹ 3.50 per share. Find the annual change in his income.

**Solution :**

1st case

Nominal value of 1 share = ₹ 10

Nominal value of 360 shares = ₹ 10 × 360 = ₹ 3,600

Market value of 1 share = ₹ 21

Market value of 360 shares = ₹ 21 × 360 = ₹ 7,560

Dividend% = 12%

Dividend = 12% of ₹ 3,600

= 12/100 × 3,600 = ₹ 432

2nd case

Nominal value of 1 share= ₹ 5

Market value of 1 share= ₹ 3.50

∴ No of shares purchased = 7/ 3.50 } = 2,160 shares

Nominal value of 2160 shares=₹ 5 × 2160= ₹ 10,800

Dividend%= 4.5%

Dividend= 4.5% of ₹ 10,800

= 4/{32 } × 10,800 = ₹ 486

Annual change in income = ₹ 486 – ₹ 432

= ₹ 54 increase

**17. **
A man sold 400 (₹ 20) shares of a company, paying 5% at ₹ 18 and invested the proceeds in (₹ 10) shares of another company paying 7% at ₹ 12. How many (₹ 10) shares did he buy and what was the change in his income?

**Solution :**

1st case

Nominal value of 1 share = ₹ 20

Nominal value of 400 shares = ₹ 20 x 400= ₹ 8,000

Market value of 1 share = ₹ 18

Market value of 400 shares = ₹ 18 x 400= ₹ 7,200

Dividend% = 5%

Dividend = 5% of ₹ 8,000

= 5/100 × 8,000 = ₹ 400

2nd case

Nominal value of 1 share = ₹ 10

Market value of 1 share = ₹ 12

∴ No of shares purchased = 7/ 12 } = 600 shares

Nominal value of 600 shares = ₹ 10 x 600 = ₹ 6,000

Dividend% = 7%

Dividend = 7% of ₹ 6,000

= 7/100 × 6,000 = ₹ 420

Annual change in income = ₹ 420 – ₹ 400

= ₹ 20 increase

**18. **
Two brothers A and B invest ₹ 16,000 each in buying shares of two companies. A buys 3% hundred-rupee shares at 80 and B buys ten-rupee shares at par. If they both receive equal dividend at the end of the year, find the rate per cent of the dividend received by B.

**Solution :**

For A

Total investment = ₹ 16,000

Nominal value of 1 share = ₹ 100

Market value of 1 share = ₹ 80

∴ No of shares purchased = 16/ 80 } = 200 shares

Nominal value of 200 shares = ₹ 100 × 200 = ₹ 20,000

Dividend% = 3%

Dividend = 3% of ₹ 20,000

= 3/100 × 20,000 = ₹ 600

For B

Total investment= ₹ 16,000

Nominal value of 1 share= ₹ 10

Market value of 1 share= ₹ 10

∴ No of shares purchased = 16/ 10 } = 1600 shares

Nominal value of 1600shares= 10 × 1600= ₹ 16,000

Dividend received by B = Dividend received by A = ₹ 600

Dividend % = (Dividend/Nominal value) x 100%

= 600/16000 x 100%

= 3.75 %

**19. **
A man invests ₹ 20,020 in buying shares of nominal value ₹ 26 at 10% premium. The dividend on the shares is 15% per annum. Calculate :

(i) the number of shares he buys.

(ii) the dividend he receives annually.

(iii) the rate of interest he gets on his money.

**Solution :**

Total investment = ₹ 20,020

Nominal value of 1 share = ₹ 26

Market value of 1 share = ₹ 26+ 10% of ₹ 26

= ₹ 26+ ₹ 2.60 = ₹ 28.60

∴ No of shares purchased = 20/ 28.60 } = 700 shares

Nominal value of 700 shares= ₹ 26 x 700 = ₹ 18,200

Dividend% = 15%

Dividend = 15% of ₹ 18,200

= 15/100 × 18,200 = ₹ 2,730

∴ Income % = (Income/Investment) x 100%

= (2730/20020) x 100%

= 150/11 % = 13 7/11 %