Question

A man buys a Rs. 80 share in a company, which pays 20% dividend. He buys the shares at such a price that his profit is 16% on his investment. At what price did he buy the share?

• A. 50
• B. 100
• C. 200
• D. 300

Answer 1

Answer:

B. 100

The correct answer is Option B (Rs. 100).

In share market problems, it's important to remember that dividends are always paid on the Face Value of the share, while the profit (yield) is calculated on your actual investment (the price you paid). Step-by-Step Calculation

1. Calculate the Dividend Amount:
   The company pays a 20% dividend on the face value of Rs. 80.
   $\text{Dividend} = 20\% \text{ of } 80 = 0.20 \times 80 = \mathbf{Rs. 16}$

2. Determine the Purchase Price:
   The man receives this Rs. 16 dividend, and it represents a 16% profit on what he spent. Let his purchase price be $x$.
   $16\% \text{ of } x = 16$

3. $0.16 \times x = 16$

   $x = \frac{16}{0.16} = \mathbf{100}$

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Summary:

• Face Value: Rs. 80

• Dividend: Rs. 16

• Purchase Price: Rs. 100 (Option B)