Question

Which is the better investment:
$16\%$ $Rs.100$ shares at $80$ or $20\%$ $Rs.100$ shares at $120$ ?

Answer 1

$I^{st}$ case :- 16% Rs 100 shares at 80 means:

Market value of 1 share = 80 Rs.

Nominal value of share = 100 Rs.

Divided = 16%

Income on Rs 80 = 16% of 100 = 16 Rs.

Income on Rs 1 $= \frac{16}{80} = 0.20 RS

II${}^{nd}$ :- 20% Rs 100 shares of 120 means

Market value of share = 120 Rs.

Nominal value of 1 share = 100 Rs.

Dividend = 20%

Income on 120 Rs = 20% of 100 = 20 Rs.

Income on 1 Rs $ = \frac{20}{120} = 0.17 Rs.

16% Rs 100 shares of 80 is better investment