Question

Which is a better investment, 4% stock at Rs. 120 or \[3\% \] at Rs. 80?
A) First
B) Second
C) Data insufficient
D) None of these

Answer 1

Hint:
To compare the investment, we need to find the income on rupee 1 for each investment. Then we will compare the income on both for rupee 1. After that the one which is greater would be a better investment. Hence, we will get to the final answer.

Complete step by step solution:
We need to find the income per rupee on each stock.
According to the question,
Income from first stock on Rs. 120 is Rs. 4
Hence,
Income\[({I_1})\] from first stock on \[Rs.{\text{ }}1{\text{ }} = {\text{ }}Rs.{\text{ }}\dfrac{4}{{120}}\]
\[ \Rightarrow {{\text{I}}_1}{\text{ = }}Rs.{\text{ }}0.033\]
According to the question,
Income\[({I_2})\] from second stock on Rs. 80 is Rs. 3
Hence,
Income from second stock on \[Rs.{\text{ }}1{\text{ }} = {\text{ }}Rs.{\text{ }}\dfrac{3}{{80}}\]
\[ \Rightarrow {{\text{I}}_2} = {\text{ }}Rs.{\text{ 0}}{\text{.0375}}\]
Clearly,
$ \Rightarrow {I_1} < {I_2}$
Therefore, income from the second investment is better than the first investment

Hence, our final answer is B.

Note:
This method is known as the unitary method, in questions like these, if we want to compare any two or more than two quantities, we should always first calculate the quantity for unit value. This would make comparison very easy and efficient.