Which is a better investment : Rs. 200 shares at Rs. 220 which pay a dividend of 10%, or Rs. 100 shares at Rs. 120 which pay a dividend of 12% ?

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Solution

Case 1 :
Rs. 200 shares at Rs. 220 paying a dividend of 10%.
Rate of return = $\frac{F V \times R a t e o f d i v i d e n d}{M V} = \frac{200 \times 10}{220} = 9 \frac{1}{11}$ %

Case 2 :
Rs. 100 shares at Rs. 120 paying a dividend of 12%
Rate of return = $\frac{F V \times R a t e o f d i v i d e n d}{M V} = \frac{100 \times 12}{120} = 10$ %

Therefore, 12%, Rs. 100 shares at Rs. 120 is a better investment.

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Which is a better investment : Rs. 200 shares at Rs. 220 which pay a dividend of 10%, or Rs. 100 shares at Rs. 120 which pay a dividend of 12% ?

Case 1 :Rs. 200 shares at Rs. 220 paying a dividend of 10%.Rate of return = FV×Rate of dividendMV=200×10220=9111%Case 2 :Rs. 100 shares at Rs. 120 paying a dividend of 12%Rate of return = FV×Rate of dividendMV=100×12120=10%Therefore, 12%, Rs. 100 shares at Rs. 120 is a better investment.