Question

At what price should a \[6.25%\] Rs. \[100\] shares should be quoted when the money is worth \[5%\].

Answer 1

Hint:Now to solve this question you will start by finding what the income is.To find the income we will find how much \[6.25%\] gives you from the total amount which we can see to be Rs. \[100\]. Now we can say from the question that we also know what the income percentage is. Since we know the return percentage and income we can find the value of investment which is asked in this question by letting investment be any variable let's say x. Now we can use the formula that the return is income divided by invested and find out the answer needed.

Formula used:
The formula used here is
\[Return \%=\dfrac{Income}{Investment}\times 100\]


Complete step by step answer:
First we can start this question by finding out what the income in this question will be. Now we know that the share is a \[6.25\%\] from Rs \[100\]. Using this information we can find out the value of income. Since we can say that we will get an income of \[6.25\%\] out of whatever the total value of share is here in the case it being Rs. \[100\]. Therefore
\[Income=\dfrac{6.25}{100}\times 100\]
Now simplifying this we can find the income
\[Income=Rs.\text{ }6.25\]

Now we need to find the return percentage. As we can see in the question it is given that the shares are worth \[5\%\] which is the value of return percentage.To find investment let it be known as x. Now we know that return percent is
\[Return\%=\dfrac{Income}{Investment}\times 100\]
Therefore substituting all the values here
\[5=\dfrac{6.25}{x}\times 100\]
Cross multiplying we get
\[x=\dfrac{6.25}{5}\times 100\]
Solving we can find the value of investment which is
\[\therefore x=Rs.\text{ }125\]

Hence a \[6.25\%\] Rs. \[100\] shares should be quoted at \[Rs.\text{ }125\] when the money is worth \[5\%\].

Note: Yield and return are very different ways of measuring the profitability of an investment for a period of time. We can say that yield is the income the investment returns over time, typically expressed as a percentage, while return is the amount that was gained or lost on an investment over time. A common mistake that can be made in this question is that return percentage is sometimes taken as the ratio of investment on income instead of income upon investment.