An investor splits funds between a 9% stock at 96 and a 12% stock at 120. In what ratio must he invest to receive equal returns_________?
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Answer: D. 16:15
Explanation
The income generated per rupee invested in a stock is calculated by dividing the dividend percentage by the market price. For the first stock, the return per rupee invested is nine divided by ninety-six, and for the second stock, it is twelve divided by one hundred twenty. Setting the returns equal and simplifying the resulting fraction gives the required investment ratio of sixteen to fifteen. Investment return ratios compare the income generated per unit of capital across different financial securities. Stocks priced below par are at a discount, while stocks priced above par trade at a premium affecting yield. Equating investment returns requires balancing the dividend yields against the respective market purchase prices.
Option A suggests an incorrect inverse ratio that fails to balance the per-rupee income yields. Option B produces unequal financial returns when tested against the given stock prices and dividend rates. Option C fails to satisfy the mathematical equivalence required between the two stock pricing structures.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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