Question

which investment gives a better return : 5% stock @ 75 , subject to 30% income tax or 4% stock @ 90, tax free.
(Assume the face value of share to be rs 100)​

Answer 1

Step-by-step explanation:

Given Which investment gives a better return : 5% stock @ 75 , subject to 30% income tax or 4% stock @ 90, tax free.

• We need to find the investment that gives a better return.
• Assuming the face value of shares to be Rs 100 we have,
• So investment of Rs 75 on Rs 100, the returns will be 5%
• So total returns will be 5/100 x 100
• This will be with 30% tax.
• Therefore the deduction of tax final returns will be  
•                    5 x 70 / 100
•                       0.5 x 0.7
•                        = 3.5
• Percentage return will be 3.5 / 75 x 100
•                                    = 4.66 %
• Now an investment of Rs 90 the returns will be 4% on Rs 100
• This will be tax free.
• So Total returns will be 4/100 x 100
•                                      = 4
• Percentage return will be 4 / 90 x 100
•                                        = 400 / 90
•                                         = 4.44 %
• So 5% stock at 75 will give a better return.

Reference link will be

https://brainly.in/question/17564993