Equivalent yield pricing across different coupons A invested in 4% stock at 96. For B to invest in an equally good 5% stock (same yield as A), at what price per Rs. 100 nominal should B purchase?

Introduction / Context:
To match yields across different coupon rates, set the yield from the first stock equal to the yield from the second and solve for the second stock’s purchase price. This is a common equivalence exercise in stocks and shares.

Given Data / Assumptions:

• A: 4% at 96 ⇒ Yield_A = 4/96 * 100.
• B: 5% at unknown price P ⇒ Yield_B = 5/P * 100.
• Equal yield ⇒ Yield_A = Yield_B.

Concept / Approach:
Set 4/96 * 100 = 5/P * 100 ⇒ 4/96 = 5/P ⇒ P = (5 * 96) / 4 = 480/4 = 120. Therefore B must buy at Rs. 120 to match A’s yield.

Step-by-Step Solution:
Yield_A = (4/96)*100 ≈ 4.1667%.Set (5/P)*100 = 4.1667% ⇒ 5/P = 1/24 ⇒ P = 120.

Verification / Alternative check:
Check: 5/120 * 100 = 4.1667%, exactly the same as 4/96 * 100. Hence the two are equally good by yield.

Why Other Options Are Wrong:
Rs. 124, Rs. 96, Rs. 80, or Rs. 76.80 would give yields different from 4.1667% and thus are not “equally good.”

Common Pitfalls:
Setting coupon rates equal instead of yields, or forgetting to divide by price. Yield depends on both coupon and the price paid.

Final Answer:
Rs. 120