Calculate the annual return generated by Rs. 2500 invested in an 8% stock at 106.
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Answer: C. 200
Explanation
The annual return is determined by scaling the nominal interest rate against the purchase price. Investing an amount in an 8 percent stock at 106 means paying 106 for every 100 of face value. Dividing the nominal dividend by the purchase price gives the actual proportionate cash return generated. Stock investments in this context refer to fixed income securities paying a standard face value dividend. The market price of a stock frequently differs from its face value based on investor demand. Calculating income requires matching the investment amount to the cost price rather than face value.
Investors evaluate stock yields carefully to compare fixed income opportunities against fluctuating market prices. Understanding stock pricing helps retirees secure predictable annual income from dividend paying securities. Financial analysts use proportional calculations to determine exact cash flows from corporate bonds. Option A represents an incorrect calculation based solely on face value without market price adjustment. Option B incorrectly scales the investment amount and assumes a higher interest rate multiplier. Option D overestimates the return by treating the purchase price as lower than its true value.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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