Dividend, Income and Cost of Investment

This section brings the two golden rules of §4 together into the three quantities every stock-and-shares problem revolves around: the dividend on one share, the total annual income, and the cost of investment.

Dividend on one share. Since the dividend rate is always applied to the face value:

where $r$ is the dividend (or interest) rate and $FV$ is the face value. For a 12% dividend on a ₹100 share this is $\tfrac{12}{100}\times100 = ₹12$ per share.

Number of shares. If a person invests an amount $P$ by buying shares at a market price $MP$ per share (ignoring brokerage for the moment):

For stock quoted per ₹100 nominal, the corresponding relation is $\text{Nominal stock held} = \dfrac{\text{Amount invested}}{\text{Market price per }₹100} \times 100$.

Total annual income. The income (also called the annual return) is the total dividend received across all the shares held:

Equivalently, for stock: $\text{Annual income} = \dfrac{r}{100} \times (\text{total nominal value held})$.

Cost of investment. The cost is what the investor actually pays out:

Brokerage is treated fully in §6; where a problem gives no brokerage, the cost is simply shares × market price. …