Which is the better investment: an 11% stock quoted at Rs. 143 or a 9.75% stock quoted at Rs. 117, if you compare the effective yield on investment?

Introduction / Context:
Many stock and shares questions ask you to compare two different investments and decide which is better. "Better" usually means that the investment gives a higher percentage return (yield) on the money invested, assuming risk and other factors are similar. Here we compare an 11% stock and a 9.75% stock, each quoted at a different market price.

Given Data / Assumptions:

• First stock: 11% stock at a market price of Rs. 143 per Rs. 100 nominal.
• Second stock: 9.75% stock at a market price of Rs. 117 per Rs. 100 nominal.
• Dividend is calculated on nominal value; yield is calculated on market value.
• No brokerage is mentioned.

Concept / Approach:
We compute the yield for each stock individually using:
yield % = (dividend per Rs. 100 nominal / market price) * 100 Then we compare the two yield percentages. The investment with the higher yield is the better one from a purely return-based perspective.

Step-by-Step Solution:
Step 1: For the 11% stock, dividend per Rs. 100 nominal = Rs. 11. Step 2: Market price = Rs. 143. Yield % for this stock = (11 / 143) * 100. Step 3: Compute 11 / 143 ≈ 0.07692, so yield ≈ 7.692%. Step 4: For the 9.75% stock, dividend per Rs. 100 nominal = Rs. 9.75. Step 5: Market price = Rs. 117. Yield % for this stock = (9.75 / 117) * 100. Step 6: Compute 9.75 / 117 ≈ 0.08333, so yield ≈ 8.333%. Step 7: Compare the yields: about 7.692% versus 8.333%. The second stock has the higher yield.

Verification / Alternative check:
If you imagine investing Rs. 1,430 in the first stock, you would buy 10 nominal lots of Rs. 100 and receive dividend 10 * 11 = Rs. 110. Yield ≈ 110 / 1430 * 100 ≈ 7.692%. Similarly, investing Rs. 1,170 in the second stock buys 10 nominal lots and yields 10 * 9.75 = Rs. 97.50, giving 97.5 / 1170 * 100 ≈ 8.333%. This again confirms that the second stock offers the better return.

Why Other Options Are Wrong:
They are not equally good because the yields differ. It is not true that they cannot be compared; yield calculation does not require a specific investment amount. Saying both give yield less than 5% is numerically false. The 11% stock at 143 is decent but still inferior to the 9.75% stock at 117 in terms of yield.

Common Pitfalls:
Students sometimes compare the nominal percentages only and conclude that 11% must be better, ignoring the effect of market price. Another mistake is to think that the total investment amount is needed; but yield is independent of scale. Always compute yield as dividend divided by market price to compare investments accurately.

Final Answer:
The better investment is the 9.75% stock quoted at Rs. 117.