Discussion
A company pays 12.5% dividend to its investors. If an investor buys Rs.50 shares and gets 25% on investment, at what price did the investor buy the shares?
Answer: B
The dividend is a percentage of the face value.
\[ \text{income} = 12.5\% \text{ of } 50 = \text{Rs. } 6.25 \]
The investor wants that to be 25% of what was paid:
\[ \text{price} = \frac{6.25}{0.25} = \text{Rs. } 25 \]
Dividend is reckoned on face value, yield on market value - keeping the two apart is the whole of this topic.
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