Question

Tejas invests in 9% Rs. 100 shares at Rs. 145 but Shail invests in 7% Rs. 100 shares at Rs.116. whose investment is better?

Answer 1

Investment of Tejas:

Given that, the Face value of the share (F.V.) = ₹ 100

The market value of the share (M.V.) = ₹ 145

Dividend = 9%

Annual income from the share = `9/100 xx 100`

= ₹ 9

Rate of return = `"Annual income"/"Market value" xx 100`

= `9/145 xx 100`

= `900/145`

≈ 6.2%

Investment of Shail:

Face value of the share (F.V.) = ₹ 100

The market value of the share (M.V.) = ₹ 116.

Dividend = 7%

Annual income from the share = `7/100 xx 100`

= ₹ 7

Rate of return = `"Annual income"/"Market value" xx 100`

= `7/116 xx 100`

≈ 6.03%

Since the rate of return for Tejas’s investment is greater than that for Shail’s, Tejas’s investment is better.