Required investment for target income — 6% stock at 96: What investment (in ₹) is needed to secure an annual income of ₹100?

Introduction / Context:Given a coupon rate and a quoted price, compute how much cash must be invested to produce a specific income. This reverses the usual yield calculation.

Given Data / Assumptions:

• Coupon rate = 6% ⇒ ₹6 per ₹100 nominal per year.
• Market price = ₹96 per ₹100 nominal.
• Target income = ₹100 per year.

Concept / Approach:If I is the investment, the number of ₹100-nominal units = I / 96. Income = (I / 96) * 6. Set equal to 100 and solve I = 100 * 96 / 6.

Step-by-Step Solution:(I / 96) * 6 = 100.I = 100 * 96 / 6 = 1600.

Verification / Alternative check:At investment ₹1600, units = 1600/96 = 16.666… of ₹100 nominal; income = 16.666… * 6 = ₹100, confirming the target.

Why Other Options Are Wrong:

• ₹1504 and ₹1666.66 produce different incomes than ₹100 for a 6% coupon at ₹96 price.
• ₹5760 is not related to the small income target given the high coupon.

Common Pitfalls:

• Treating 6% as applied to the investment instead of nominal value.

Final Answer:Rs. 1600