Aptitude - Stocks and Shares - Discussion

Let us assume face value of stock is Rs.100.

11% stock at 143 means:
11% = dividend rate which can be calculated on face value.i.e. dividend = 11% on 100 = Rs.11.
143 = market value of stock at which we can buy or sell the stock.

Here, we have to calculate the interest rate as we actually receive Rs.11 on investment of Rs.143 i.e. market value, the rate at which may be bought the stock.

Therefore, in 1st case interest rate = Rs.11/Rs.143 * 100=7.69%.
Similarly in 2nd case interest rate= Rs.9.75/Rs.117 * 100=8.33%.
As the interest is more in case 2.
The better investment is case 2.

There is the only thing which is creating a problem, that is face value.

What is the Face value? If not given take it as 100 always.

Here or anywhere if it is written 11% stock at 143 it means 11 Rupee's you will gain by investing 143 Rupees.

For this question.

If we put 143 we get 11 rupees.
So if we put 1 rupee we get 11/143.

And, in another case.

If we put 117 Rs we get 39/4 rupees.
So for 1 rupee we get (39/4) * (1/117).
11/143 < (39/4) * (1/117).

For making calculation simple, instead of 1 rupee they compared it for 143 * 117 rupees, as it will cancel some value.

How investment is 143*117?

We need to assume that face value for both investment is same.

Alternate
1 case: if we invest rs 143 we get a profit of 11 rs therefore 100 rs how much
i.e 143 rs invest 11 rs profit
100 rs ?

(100*11)/143=7.69 rs profit

2 case: if we invest rs 117 we get 9.75 rs profit therefore for 100 rs how much?
i.e 117 rs invest 9.75 rs profit
100 rs ?

(100*9.75)/117=8.333 rs profit


From above we can clearly make out that 2 case is best...

I hope you understood the logic.

As 143 and 117 is not a facevalue, its only market vallue. And we have to calculate the rates on facevalue only, hence in both the cases we take the respective market value.

I can't understand completely, so please explain in a easy way.

They have assumed that the face value of both stocks is Rs 100. One more assumption is that only one share has been bought.

We need to assume that face value for both investment is same.

There is another efficient way.

For 117 in the first case (11/143)*117=9,
For 117 in the second case 9+(given).
Clearly second wins.