MathsICSE Class 10 · Shares and Dividends

Return on Investment in Shares: Formula, Comparisons and Solved Questions (ICSE Class 10)

Updated 15 October 2026 · Fact-checked

The return (yield) on shares is the annual income as a percentage of the money invested: return % = income ÷ investment × 100. For one share this equals dividend % × face value ÷ market value. So a share bought above par returns less than its dividend rate, and one bought below par returns more.

The dividend is the same ₹10, but the dearer the share is bought (above the red face-value line), the smaller the return.

Illustration drawn for QuestionBuddy.

Understand Return on Investment in Shares

The rate of dividend tells you what the company pays per ₹100 of face value. But what matters to an investor is what his money earns. That is the return (also called the yield or rate of return), the formula given in the CISCE syllabus:

$Return = \frac{Income}{Investment} \times 100%.$

For a single share, income is the dividend per share and investment is the market value, so

$Return % = \frac{dividend % \times FV}{MV} .$

Par, premium and discount. This one relation explains a favourite MCQ:

At par (MV = FV): return % = dividend %.
Above par, at a premium (MV > FV): return % < dividend %.
Below par, at a discount (MV < FV): return % > dividend %.

In 2025 Q1(viii), a 12% dividend gave a 10% return, so the shares were above par. The examiners reported candidates who chose 'below par' or 'cannot be determined'.

Finding a missing quantity. The relation $return \times MV = dividend % \times FV$ (both sides equal 100 × the dividend per share) lets you find any one of the four from the other three. For example, a ₹200 share bought at a 25% premium (MV ₹250) that returns 5% pays $5%$ of $250 = ₹12.50$ per share, which is a dividend of $\frac{12.50}{200} \times 100 = 6.25%$ . This was 2025 Q8(i); the examiners reported candidates who misread 'return of 5%' and mixed up the market value and the face value.

Comparing investments. To decide which of two shares is the better investment, compare the returns, not the dividend rates. A 15% dividend on a share bought at three times its face value returns only 5%. When the same sum is invested in both, the one with the higher return gives the higher income, and the income difference is (difference of returns) × investment ÷ 100.

Splitting a sum between two shares. If a total sum is split and the total income is known, let one part be $x$ ; then income = $\frac{r _{1}}{100} x + \frac{r _{2}}{100} (total - x)$ , where $r_{1}, r_{2}$ are the two returns. This is a simple linear equation.

Return on Investment in Shares: formulas to remember

Return on investment: $Return % = \frac{Income}{Investment} \times 100$; The CISCE syllabus formula.
Return per share: $Return % = \frac{dividend % \times FV}{MV}$; Same as income per share ÷ price per share × 100.
Key relation: $Return % \times MV = Dividend % \times FV$; Find any one of the four from the other three.
Par, premium, discount: $MV > FV \Leftrightarrow return < dividend rate$; Equal at par; reversed at a discount.
Income from a return: $Income = \frac{Return %}{100} \times Investment$; Useful when comparing or splitting investments.

How to solve Return on Investment in Shares questions

Return questions all rest on the key relation return × MV = dividend × FV.

1Write FV, MV, dividend % and return % (one of them unknown).
2If the market value is given as a premium or discount, convert it to rupees first.
3For the return: return % = dividend % × FV ÷ MV.
4For the dividend rate: dividend per share = return % of MV; then dividend % = that ÷ FV × 100.
5For the market value: MV = dividend % × FV ÷ return %.
6To compare two investments, compute both returns; the higher return gives more income per rupee.
7To split a sum, write income as a sum of returns on the two parts and solve.

Return on Investment in Shares in real life

Each concept, met in an everyday situation. Read the situation, try the problem, then check the solution. The one-line hook is what to remember.

Return compared with dividend rate

Suppose a friend buys shares of face value ₹10 at ₹16 each, and the company pays a 20% dividend.

What return does your friend actually get on the money spent?

Try it first, then show the solutionSolution

Dividend per share $= 20%$ of $10 = 2$ .
Return $= \frac{2}{16} \times 100 = 12.5%$ .

Answer: 12.5%, not 20%, because the shares were bought above par.

Memory hook: A bigger price tag shrinks the return.

Comparing a share with a bank deposit

Imagine your father can either put money in a deposit paying 7% a year or buy ₹100 shares at ₹150 that pay a 12% dividend (assume the dividend stays the same).

Which gives the higher yearly return on his money?

Try it first, then show the solutionSolution

Share return $= \frac{12 \times 100}{150} = 8%$ .
$8% > 7%$ .

Answer: The shares, with an 8% return against 7% (on the assumption that the dividend does not change).

Memory hook: Compare returns, never raw dividend rates.

Tricks to remember Return on Investment in Shares

Short memory aids. Say each one aloud once, then use it on a question the same day.

Return × Market = Dividend × Face
R × M = D × F: 'Rich Merchants Divide Fortunes'.
Use it when: Finding any one unknown.
Above par, below rate
Pay above face value and your return falls below the dividend rate (and vice versa).
Use it when: Par/premium/discount MCQs such as 2025 Q1(viii).
Return is for the investor, dividend is for the share
Dividend % is per ₹100 of face value; return % is per ₹100 you spend.
Use it when: Not mixing up the two rates.

Return on Investment in Shares: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Return on a premium share · 1 mark · MCQBoard level

A man buys ₹100 shares at ₹120. The company pays a 9% dividend. The percentage return on his investment is:
(a) 9%
(b) 7.5%
(c) 10.8%
(d) 12%

Try it first, then show the solutionSolution

Dividend per share $= 9$ .
Return $= \frac{9}{120} \times 100 = 7.5%$ .

Answer: (b) 7.5%

Example 2: Income and return · 3 marks · Short answerBoard level

Sara invests ₹16,000 in ₹50 shares at ₹40 each. The dividend is 10%. Find (a) the number of shares, (b) her annual income, (c) her percentage return.

Try it first, then show the solutionSolution

(a) $\frac{16000}{40} = 400$ shares.
(b) $400 \times 50 \times \frac{10}{100} = 2000$ .
(c) $\frac{2000}{16000} \times 100 = 12.5%$ .

Answer: (a) 400 (b) ₹2,000 (c) 12.5%

Example 3: Market value for a required return · 3 marks · Short answerHarder board level

A company pays a 12% dividend on its ₹100 shares. At what market price should a man buy them to get a 15% return? Is this at a premium or a discount?

Try it first, then show the solutionSolution

Return × MV = dividend % × FV: $15 \times MV = 12 \times 100$ .
$MV = \frac{1200}{15} = 80$ .
MV < FV, so at a discount of ₹20 (20%).

Answer: ₹80, at a discount of 20%.

Example 4: The better investment · 4 marks · Short answerHarder board level

Which is the better investment: 10% dividend on ₹100 shares at ₹125, or 12% dividend on ₹20 shares at ₹25? If ₹30,000 is invested, how much more income does the better one give?

Try it first, then show the solutionSolution

First: return $= \frac{10 \times 100}{125} = 8%$ .
Second: return $= \frac{12 \times 20}{25} = 9.6%$ , so the second is better.
Incomes on ₹30,000: $8%$ gives $2400$ ; $9.6%$ gives $2880$ .
Difference $= 480$ .

Answer: The 12% shares at ₹25 (9.6% return); ₹480 more income.

Example 5: Dividend rate from the return · 4 marks · Short answerHOTS / competency

Mr Iyer buys ₹50 shares at a premium of 20% and gets a 6% return on his investment. Find (a) the market value, (b) the rate of dividend, (c) the number of shares he must hold for an income of ₹720.

Try it first, then show the solutionSolution

(a) MV $= 50 + 10 = 60$ .
(b) Dividend per share $= 6%$ of $60 = 3.60$ ; rate $= \frac{3.60}{50} \times 100 = 7.2%$ .
(c) Shares $= \frac{720}{3.60} = 200$ .

Answer: (a) ₹60 (b) 7.2% (c) 200 shares

Example 6: Case study: should she switch? · 4 marks · Case-basedHOTS / competency

Mrs Paul holds 500 shares of face value ₹10 paying an 18% dividend; they now sell at ₹20. Another company's ₹100 shares, paying 8%, sell at ₹80.
(a) Find the return each share gives at today's prices.
(b) She sells all her shares and buys the other company's shares. How many does she get?
(c) By how much does her annual income change?

Try it first, then show the solutionSolution

(a) Present shares: $\frac{18 \times 10}{20} = 9%$ ; other shares: $\frac{8 \times 100}{80} = 10%$ .
(b) Proceeds $= 500 \times 20 = 10000$ ; new shares $= \frac{10000}{80} = 125$ .
(c) Present income $= 500 \times 10 \times 0.18 = 900$ ; new income $= 125 \times 100 \times 0.08 = 1000$ .
Increase $= 100$ , which is $(10% - 9%)$ of ₹10,000.

Answer: (a) 9% and 10% (b) 125 shares (c) Income rises by ₹100.

Where students lose marks in Return on Investment in Shares

The slips examiners see most often, and what to write instead.

Mistake: Comparing the dividend rate with the return without the market value
Whether return is above or below the dividend rate depends on MV versus FV.
Wrong working
Dividend 12%, return 10%: 'below par' because 10 < 12.
Right working
Return < dividend means MV > FV: above par.
Do this: Use return × MV = dividend × FV.
Usually costs: The MCQ in 2025 Q1(viii).
Mistake: Applying the return to the face value
Return is a percentage of the money invested (the market value).
Wrong working
5% return on a ₹200 share: dividend per share $= 10$ .
Right working
5% of MV ₹250 $= 12.50$ .
Do this: Return goes with Market value; dividend goes with Face value.
Usually costs: Examiners reported misreading the 5% return in 2025 Q8(i).
Mistake: Choosing the investment with the higher dividend rate
A high dividend on an expensive share can give a low return.
Wrong working
12% > 10%, so the 12% shares are better (without checking prices).
Right working
Compare $\frac{12 \times 20}{25} = 9.6%$ with $\frac{10 \times 100}{125} = 8%$ .
Do this: Always compute both returns.
Usually costs: The reasoning marks.

Exam tips

In 2025 Q8(i) the expected points were MV ₹250, dividend per share ₹12.50, dividend 6¼% and 80 shares; the examiners suggested writing improper fractions as mixed fractions.
Write the relation 'Return × MV = Dividend × FV' in comparison questions; examiners accept it as method.
Give the 'better investment' answer in words with both returns shown.
A percentage return of 6.25% may be written 6¼%.

Practice questions on Return on Investment in Shares

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
A company pays a 9% dividend and a man's return on his investment is 12%. The shares were bought:
(a) at par
(b) below par
(c) above par
(d) cannot be determined
Hint
Return is more than the dividend rate.
Answer
(b) below par.
Q2 · 3 marks · Short answerBoard level
Find the percentage return on ₹25 shares bought at ₹30 when the dividend is 12%.
Hint
Dividend per share ₹3.
Answer
$\frac{3}{30} \times 100 = 10%$ .
Q3 · 3 marks · Short answerHarder board level
A woman invests ₹24,000 in ₹100 shares at ₹160 and gets ₹1,800 a year. Find (a) the rate of dividend, (b) her percentage return.
Hint
Number of shares = 150.
Answer
(a) $\frac{1800}{150 \times 100} \times 100 = 12%$ . (b) $\frac{1800}{24000} \times 100 = 7.5%$ .
Q4 · 3 marks · Short answerHarder board level
At what price should ₹100 shares paying a 9% dividend be bought to give a 12% return?
Hint
$12 \times MV = 9 \times 100$ .
Answer
MV $= ₹75$ (a 25% discount).
Q5 · 1 mark · Assertion-reasonHarder board level
Assertion (A): If the return on a share equals its rate of dividend, the share was bought at par.
Reason (R): Return % = dividend % × FV ÷ MV.
(a) (A) is true and (R) is false.
(b) (A) is false and (R) is true.
(c) Both (A) and (R) are true, and (R) is the correct explanation for (A).
(d) Both (A) and (R) are true, but (R) is not the correct explanation for (A).
Hint
If the two percentages are equal, FV ÷ MV = 1.
Answer
(c)
Q6 · 4 marks · Short answerHOTS / competency
A man invests ₹45,000, part in ₹100 shares at ₹125 paying 15% and the rest in ₹100 shares at ₹80 paying 10%. His total income is ₹5,500. How much did he invest in each?
Hint
Returns are 12% and 12.5%.
Answer
$0.12 x + 0.125 (45000 - x) = 5500 \Rightarrow 5625 - 0.005 x = 5500 \Rightarrow x = 25000$ . So ₹25,000 in the first and ₹20,000 in the second.
Q7 · 4 marks · Short answerHarder board level
A ₹200 share paying a 6% dividend gives a return of 4.8%. Find its market value and the percentage premium or discount.
Hint
Dividend per share = ₹12.
Answer
MV $= \frac{12}{0.048} = ₹250$ , a premium of ₹50, that is 25%.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.₹100 share at ₹80 paying 8%. Return?Show answer
10%.
2.Return 10%, dividend 12%: above or below par?Show answer
Above par.
3.₹50 share, 10% dividend, 8% return. Market value?Show answer
$\frac{10 \times 50}{8} = ₹62.50$ .
4.Income ₹900 on investment ₹12,000. Return?Show answer
7.5%.
5.Which rate tells you what your money earns: dividend or return?Show answer
The return.

Return on Investment in Shares: frequently asked questions

What is the formula for return on investment in shares?

Return = income ÷ investment × 100. For one share it is the dividend per share divided by the market value, times 100.

How do I know if shares were bought above or below par from the return?

If the return is less than the dividend rate, the shares were bought above par (at a premium). If it is more, they were bought below par. If equal, at par.

How do I decide which of two shares is the better investment?

Work out the return on each, using dividend % × face value ÷ market value. The share with the higher return is the better investment.