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% of 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 = `16/80` = Rs. 0.20

2^nd case:

20% of 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 = `20/120` = Rs. 0.17

Then 16% Rs. 100 shares at 80 is better investment.