A invests in a 10% stock at 96. To obtain an equivalent yield, what amount should B invest in a 12% stock___________?
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Answer: C. Rs.115.20
Explanation
Equivalent yield requires that the return per rupee invested remains constant. A 10 percent stock at 96 generates a specific income ratio per unit of currency. Equating this ratio to a 12 percent stock yields a required investment of 115.20 rupees. Dividend income equals nominal stock amount multiplied by dividend percentage. Investment cost equals nominal amount multiplied by market price divided by 100. Return per rupee is calculated as dividend percentage divided by market price.
Investors frequently reallocate funds between different stocks to maintain equivalent income. Comparative yield analysis ensures optimal deployment of capital in financial markets. Arbitrage strategies in finance rely on identifying equivalent yield opportunities. Choosing 50 rupees severely underestimates the capital needed for equivalent income. Choosing 105 rupees fails to satisfy the proportional yield equation for the stocks. Choosing 125.40 rupees overestimates the required investment amount for the 12 percent stock.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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