Question:medium
Which investment gives a better return, assuming the face value of shares to be Rs. 10?
A. 5% stock at 75, subject to 30% income tax
B. 4% stock at 90, tax free
Which investment gives a better return, assuming the face value of shares to be Rs. 10?
A. 5% stock at 75, subject to 30% income tax
B. 4% stock at 90, tax free
A. 5% stock at 75, subject to 30% income tax
B. 4% stock at 90, tax free
Show Hint
Work out each stock's after tax yield as (net income divided by market price) times 100, then compare.
Updated On: Jul 14, 2026
- B
- A
- Both A and B
- None of these
Show Solution
The Correct Option is B
Solution and Explanation
Step 1: Invest Rs.900 in each.
A: 900/75=12 units, dividend=60, tax=18, net=42
B: 900/90=10 units, dividend=40, net=40
Step 2: Compare. A gives Rs.42 vs B's Rs.40 for same investment.
Final Answer: Stock A is the better investment.
A: 900/75=12 units, dividend=60, tax=18, net=42
B: 900/90=10 units, dividend=40, net=40
Step 2: Compare. A gives Rs.42 vs B's Rs.40 for same investment.
Final Answer: Stock A is the better investment.
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