1.

Which of the following is the least attractive scheme?

Answer»

`5%` of Rs.120 SHARES at Rs.150.
`6%` Rs.105 shares at Rs.140.
`7%` Rs.105 shares at Rs.125.
`8%` Rs.80 shares at Rs.108.

Solution :Case 1: Face value/share = Rs.120
Dividend rate `=5%`
Annual income/share`=(5)/(100)("Rs.120")="Rs.6"`
Market value/share = Rs.150
Rate of return `=(6)/(150)(100)=4%`
In a similar manner, the rates for the remaining choices can be worked out.
Choice 2: Annual income/share = Rs.6.30
Rate of return `=(6.3)/(14)(100)=(9)/(2)%`.
Choice 3: Annual income/share = Rs.6.30
Rate of return `=(6.3)/(125)(100)=5.04%`.
Choice 4: Annual income/share = Rs.6.40
Rate of return `=(6.4)/(108)(100)=5(25)/(27)%`.
The least ATTRACTIVE scheme is the sheme giving minimum rate of return.
`therefore` Choice (a) gives the minimum rate of return among all the choice.


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