A man invests Rs. 14,400 in Rs. 100 shares of a company that are selling at a 20% premium. If the company declares a 5% dividend on the face value at year end, what total dividend does he receive?

Introduction / Context:
This problem combines the ideas of premium on shares and dividend on nominal value. The investor buys shares that are quoted above their face value, but the dividend is still calculated on the face value. We must determine the number of shares purchased and then compute the dividend from the declared percentage rate.

Given Data / Assumptions:

• Investment amount = Rs. 14,400.
• Face value of each share = Rs. 100.
• Shares are at 20% premium, so market price per share = Rs. 120.
• Dividend declared = 5% on face value.
• No brokerage or taxes are mentioned, so they are ignored.

Concept / Approach:
First, we find how many shares the man can buy at the given premium price. Since dividend is calculated on face value, we then multiply the total nominal value of all shares by the dividend rate. Key formulas are:
number of shares = total investment / market price per share dividend per share = (dividend rate % of face value)

Step-by-Step Solution:
Step 1: Market price per share = face value + 20% of face value = 100 + 0.20 * 100 = Rs. 120. Step 2: Number of shares purchased = 14,400 / 120 = 120 shares. Step 3: Dividend per share at 5% on Rs. 100 face value = 0.05 * 100 = Rs. 5. Step 4: Total dividend received = number of shares * dividend per share = 120 * 5. Step 5: Compute 120 * 5 = Rs. 600. Step 6: Therefore, the investor receives Rs. 600 as total annual dividend.

Verification / Alternative check:
Total nominal value of the shares is 120 * 100 = Rs. 12,000. A 5% dividend on Rs. 12,000 is 0.05 * 12000 = Rs. 600, confirming our computation. The fact that he invested Rs. 14,400 simply reflects the 20% premium he paid above face value.

Why Other Options Are Wrong:
Rs. 500 and Rs. 560 do not correspond to 5% of any reasonable total nominal value based on the given numbers. Rs. 650 and Rs. 720 would require either a higher dividend percentage or a different number of shares than is possible with the given investment and premium. Only Rs. 600 matches 5% of the correct total nominal value Rs. 12,000.

Common Pitfalls:
Many learners mistakenly calculate the dividend on the market price (Rs. 120) instead of the face value (Rs. 100). Others try to take 5% of the total investment of Rs. 14,400, which is incorrect. Always remember that when a company declares a dividend of a certain percent, it is almost always on the face (nominal) value of the shares, not on the market value.

Final Answer:
The man receives a total dividend of Rs. 600 at the end of the year.