A 6 percent stock yields 8 percent to an investor. What is the market value of this stock per Rs 100 nominal value?

Introduction / Context:
This problem tests your understanding of how market value, dividend rate and yield are related for stocks. A 6 percent stock means that the company pays Rs 6 every year on a Rs 100 nominal share. The investor, however, experiences an 8 percent return on the actual amount invested, known as the yield. We must find the market price that produces this yield.

Given Data / Assumptions:

• Dividend rate = 6 percent on nominal value.
• Nominal value per share = Rs 100.
• Investor yield (return on investment) = 8 percent.
• We need the market value (price paid) per Rs 100 nominal share.

Concept / Approach:
Dividend received on one share is fixed by the nominal rate. Yield is defined as:
Yield (%) = (Annual dividend / Market price) * 100.
Rearranging this gives the formula for market price:
Market price = (Annual dividend * 100) / Yield percentage.
We simply substitute the given values for dividend and yield.

Step-by-Step Solution:
Step 1: Dividend on Rs 100 nominal value at 6 percent = 6 rupees per share. Step 2: Let M be the market value per share. Step 3: Yield (%) = (Dividend / Market value) * 100. Step 4: Given yield = 8 percent, so 8 = (6 / M) * 100. Step 5: Rearrange: M = (6 * 100) / 8 = 600 / 8 = Rs 75.
Verification / Alternative check:
Quickly check: If the market value is Rs 75 and the dividend is Rs 6, then the return is 6 / 75 = 0.08. Multiplying by 100 gives 8 percent, matching the stated yield. This confirms that the market value of Rs 75 is consistent with the given data and formula.

Why Other Options Are Wrong:

• Rs 70: This would give yield = 6 / 70 * 100 which is greater than 8 percent.
• Rs 76: This gives a yield slightly below 8 percent.
• Rs 80: This would give yield = 6 / 80 * 100 = 7.5 percent, which is not correct.

Common Pitfalls:

• Using yield as 6 percent and dividend as 8 percent, reversing the given roles.
• Forgetting to multiply dividend by 100 when solving for market value.
• Confusing nominal value with market price and using 100 instead of the unknown M in the denominator.

Final Answer:
The market value of the stock per Rs 100 nominal value is Rs 75.