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A man invested Rs. 14,400 in Rs.100 shares of a company at 20% premium. If the company declares 5% dividend at the end of the year , then how much does he get?

Correct answer: B. Rs. 600

  • A. Rs. 500
  • B. Rs. 600
  • C. Rs. 650
  • D. Rs. 720

Explanation

A 20% premium makes each Rs. 100 share cost Rs. 120, so Rs. 14400 buys Rs. 14400 ÷ Rs. 120 = 120 shares. The yearly dividend is 5% of Rs. 100, or Rs. 5 per share, so income = 120 x Rs. 5 = Rs. 600. The likely mistake is option d, Rs. 720, which applies 5% to the market investment rather than to the nominal share value.

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