Stocks and Shares – Income from discount purchase What annual income (dividend) results from investing Rs. 1900 in 8% stock quoted at 5 discount (i.e., at 95)?

Introduction / Context:Dividend income depends on the nominal (face) value purchased and the declared dividend percentage. Buying at a discount alters how much nominal you can buy for a fixed sum, but the income is always computed on nominal, not on the cash outlay.

Given Data / Assumptions:

• Investment = Rs. 1900
• Quote = 5 discount ⇒ price = 95 per Rs. 100 nominal
• Dividend rate = 8% per annum (on face value)

Concept / Approach:First find the nominal purchased from the investment at the quoted price; then compute income as dividend% of that nominal.

Step-by-Step Solution:Nominal purchased = (1900 / 95) * 100 = Rs. 2000 nominalDividend income = 8% of 2000 = 0.08 * 2000 = Rs. 160

Verification / Alternative check:Yield on cost = 160 / 1900 * 100 ≈ 8.42%, which is higher than 8% because the stock was bought at a discount.

Why Other Options Are Wrong:Rs. 150 and Rs. 100 arise from incorrect nominal calculations; Rs. 180 assumes a higher nominal than affordable at 95.

Common Pitfalls:Computing dividend on cash invested instead of on nominal face value.

Final Answer:Rs. 160