Question

Which is the better investment :

16% Rs 100 shares at 80 or 20% Rs 100 shares at 120 ?

Answer 1

1 st case:
16% Rs.100 shares at 80 means;
Market value of 1 share = Rs. 80
Nominal value of 1 share = Rs. 100
Dividend = 16%
Income on Rs. 80 = 16% of Rs. 100 = Rs. 16
Income on Rs. 1 = = 𝑅𝑠. 0.20

2 nd case:
20% Rs. 100 shares at 120 means;
Market value of 1 share = Rs. 120
Nominal value of 1 share = Rs. 100
Dividend = 20%
Income on Rs. 120 = 20% of Rs. 100 = Rs. 20
Income on Rs. 1 = = 𝑅𝑠. 0.17

Then 16% Rs. 100 shares at 80 are the better investment.