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.

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.

This is how it is:

You need to find the value of profit for both the cases, therefore.

Make the values 100 to make it easier.

1. For 11% stock/share at 143,

143 Rs : 11 Rs : 100 Rs : x Rs.

143x = 1100.

So, x = 7.692 which is the profit on 1st case.

2. For 9.75% stock/share at 117,

117 Rs : 9.75 Rs :: 100 Rs : x Rs.

So, 117x = 975.

Therefore, x = 8.333 which is the profit in 2nd case.

8.333>7.692, therefore best investment would be 2nd.

11% Means in the real world 11/100 not 11/143.
11% on 143 is 15.73.
9.75% or 9 3/4 % on 117 means 11.40.

If you invest 143 you get 15.73 143 ===> 15.73.
If you invest 117 you get 11.40 117 ===> 11.40.

Please clarify how could you determinate 11% = 11 for 143?

@Mr. Vikas don't care about the problem in reality way try to understand the given problem.

Its clear that 11% stock is once with of 117 and once with 143 so its simply multiply by those two and compare that two answers ok na. Did you get it.

Income->investment

11----->143.
39/4--->117.

Solution: here we can compare only after equating 2 investments.

So,
11*117--->143*117==>here income is 1287.
39/4*143->117*143==>here income is 1394.25

Rate of return = (dividend/investment) * 100.

1st case:

11 = (d1/143) * 100,
d1 = Rs. 15.73.

2nd case:

(39/4) = (d2/117) * 100,
d2 = Rs. 11.4075.

Answer : option A. Because dividend (d1) > dividend (d2).

I can't understand why two investment 117 and 143 are multiplied when the actual question is what is the best investment. No mention that investor have to invest these two both at a time on question.

Why answer is 2nd type of stock?

According to me,
1st case. 143*11%=15.73,
15.73/143*117=12.87,
2ndcase. 117*9.75%= 11.40.
So rate of interest is more in case 1st.