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Mathematics

Which is the better investment:

10%, ₹ 100 shares at ₹ 120 or 8%, ₹ 100 shares at ₹ 72?

Shares & Dividends

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Answer

Since,

Profit% on M.V. = Dividend% on N.V.

In first case,

P% on ₹ 120 = 10% on ₹ 100

P100×120=10100×100120P=1000P=1000120=8.33%.\Rightarrow \dfrac{P}{100} \times 120 = \dfrac{10}{100} \times 100 \\[1em] \Rightarrow 120P = 1000 \\[1em] \Rightarrow P = \dfrac{1000}{120} = 8.33\%.

In second case,

P% on ₹ 72 = 8% on ₹ 100

P100×72=8100×10072P=800P=80072=11.11%.\Rightarrow \dfrac{P}{100} \times 72 = \dfrac{8}{100} \times 100 \\[1em] \Rightarrow 72P = 800 \\[1em] \Rightarrow P = \dfrac{800}{72} = 11.11\%.

Hence, 8% ₹ 100 shares at ₹ 72 is the better investment.

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