Question

Which is better investment: $7\%$ ₹ 100 shares at ₹ 120 or $8\%$ ₹ 10 shares at ₹ 13.50?

• A. 7% Rs.100 at Rs 120
• B. 8% Rs.10 shares at Rs.13.50
• C. Both are equally good
• D. Cannot be compared, as the total amount of investment is not given.

Answer 1

The correct option is B

8% Rs.10 shares at Rs.13.50

In the first case:

7% ₹ 100 shares at ₹120 means that the income earned by investing ₹ 120 to buy the share = ₹ 7.

Return = $\frac{7}{120}=0.058$

In the second case:

8% ₹ 10 shares at ₹ 13.50 means that the income earned by investing ₹ 13.50 on this share is ₹ 0.80.

Return = $\frac{0.8}{13.5}=\frac{8}{135}=0.059$

More return better investment. Therefore, second investment is better.