By investing Rs 1620 in 8 percent stock, the annual dividend is Rs 135. What is the market price (quotation) of the stock?

Given data

• Total investment = Rs 1620
• Dividend received = Rs 135 per year
• Stock rate = 8 percent (Rs 8 per Rs 100 face)

Concept / Approach

• Dividend yield on investment = Dividend / Investment.
• For a stock of 8 percent, market price M satisfies 8 / M = Dividend / Investment.

Step-by-step calculation

Dividend rate on investment = 135 / 1620 = 1/12 = 0.083338 / M = 1/12 ⇒ M = 8 × 12 = Rs 96

Verification

At Rs 96 per Rs 100 face, Rs 1620 buys 1620/96 × 100 face = 1687.5 face; dividend = 0.08 × 1687.5 = 135.

Common pitfalls

• Confusing face value with market value while equating yields.
• Using 8 percent of investment directly without the price adjustment.

Final Answer

Rs 96