An investor A buys a 10% stock at Rs. 96 per Rs. 100 nominal. If investor B wants to invest in a 12% stock that is equally good in terms of yield, at what market price per Rs. 100 nominal should B buy the 12% stock?

Introduction / Context:
This question asks us to determine the price at which a 12% stock should be bought so that it provides the same yield as another investment in a 10% stock at a known price. It is an application of the idea that two investments are "equally good" when they offer the same percentage return on the money invested, even if their nominal rates and market prices differ.

Given Data / Assumptions:

• First investment: 10% stock at Rs. 96 per Rs. 100 nominal.
• Second investment: 12% stock at an unknown market price P per Rs. 100 nominal.
• We want both investments to yield the same percentage return.
• No brokerage is mentioned.

Concept / Approach:
Yield on investment is computed as:
yield % = (dividend per share / market price per share) * 100 For the two investments to be equally good, their yields must be equal. We compute the yield from the 10% stock at Rs. 96, then set this equal to the yield from the 12% stock at price P and solve for P.

Step-by-Step Solution:
Step 1: For the 10% stock, dividend per Rs. 100 nominal = 10% of 100 = Rs. 10. Step 2: Market price for this stock = Rs. 96. Step 3: Yield from this investment = (10 / 96) * 100 ≈ 10.4167%. Step 4: For the 12% stock, dividend per Rs. 100 nominal = 12% of 100 = Rs. 12. Step 5: Let P be the market price per Rs. 100 nominal for the 12% stock. Step 6: Yield from the 12% stock = (12 / P) * 100. Step 7: Set yields equal: (12 / P) * 100 = (10 / 96) * 100. Step 8: Simplify: 12 / P = 10 / 96. Step 9: Cross multiply: 12 * 96 = 10 * P. Step 10: Compute 12 * 96 = 1,152, so P = 1,152 / 10 = Rs. 115.20.

Verification / Alternative check:
Check yields: For 10% stock at 96, yield ≈ 10.4167%. For 12% stock at 115.20, yield = (12 / 115.20) * 100 = (0.1041667) * 100 ≈ 10.4167%. Since both give the same percentage return, they are equally good investments at these respective prices.

Why Other Options Are Wrong:
Rs. 80 would produce a higher yield than the 10% stock at 96, making it better, not equal. Rs. 120 and Rs. 125.40 would produce lower yields and thus be inferior. Rs. 96 would make the 12% stock clearly better than the 10% stock at 96. Only Rs. 115.20 ensures equality of yields.

Common Pitfalls:
Some students erroneously match only the percentages 10% and 12% without considering price, or they equate 10% of 96 with 12% of P incorrectly. Always base yield on dividend per Rs. 100 nominal divided by the market price, and then equate the two yields carefully to find the unknown price.

Final Answer:
B must purchase the 12% stock at a market price of Rs. 115.20 per Rs. 100 nominal to make it equally good as the 10% stock at Rs. 96.