Question

Mr. Das invests in ₹ 100, 12% shares of Company А available at ₹ 60 each. Mr. Singh invests in ₹ 50, 16% shares of Company B available at ₹ 40 each. Use this information to state which of the following statements is true?

Options

• The rate of return for Mr. Das is 12%

• The rate of return for Mr. Singh is 10%

• Both Mr. Das and Mr. Singh have the same rate of return of 10%

• Both Mr. Das and Mr. Singh have the same rate of return of 20%

Answer 1

Both Mr. Das and Mr. Singh have the same rate of return of 20%

Explanation:

Rate of return (yield) = (dividend per share ÷ market value per share) × 100.

Mr. Das:

Dividend = 12% of ₹ 100 

= ₹ 12

Yield = (12 ÷ 60) × 100

= 20%

Mr. Singh:

Dividend = 16% of ₹ 50

= ₹ 8 

Yield = (8 ÷ 40) × 100

= 20%