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Mathematics

Two men A and B have a choice to buy ₹ 100 shares. A buys shares at ₹ 120 per share and 5% dividend. B buys shares at ₹ 150 per share and 8% dividend. Which of the two men A and B gets the better return, if the nominal value of both the shares is ₹ 100?

  1. A

  2. B

  3. both get equal returns

  4. cannot say

Shares & Dividends

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Answer

For A,

M.V. of share = ₹ 120

N.V. of share = ₹ 100

Dividend = 5%

Income on ₹ 120 = 5% of ₹ 100 = 5100×100\dfrac{5}{100} \times 100 = ₹ 5.

Income on ₹ 1 = 5120\dfrac{5}{120} = ₹ 0.042

For B,

M.V. of share = ₹ 150

N.V. of share = ₹ 100

Dividend = 8%

Income on ₹ 150 = 8% of ₹ 100 = 8100×100\dfrac{8}{100} \times 100 = ₹ 8.

Income on ₹ 1 = 8150\dfrac{8}{150} = ₹ 0.053

∴ B gets a better return.

Hence, Option 2 is the correct option.

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