Q.A ₹100 share of a company pays a dividend of 12% and is available in the market at ₹150. Find the yield (rate of return) on this investment.

The yield is the income as a percentage of the money actually invested, so it uses the market price in the denominator, not the face value.

The ₹100 share earns ₹12 of dividend but costs ₹150, so the return on the money invested is 12 out of 150.

Given: face value $FV = ₹100$, dividend rate $r = 12\%$, market price $MP = ₹150$.

Dividend per share (on face value):

Yield on the amount invested (the market price):

The yield (8%) is below the dividend rate (12%) because the share was bought at a premium (₹150 for a ₹100 share), exactly as §6 predicts.

Cross-check by the direct formula. Using $\text{Yield}\% = \dfrac{r\times FV}{MP} = \dfrac{12\times100}{150} = \dfrac{1200}{150} = 8\%$. This one-step formula gives the identical result, confirming the calculation.

Students often report the yield as the dividend rate itself (12%), forgetting that the rate is on face value while yield is on the money invested. Whenever the market price differs from the face value, the yield and the dividend rate must differ too.