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1. Which is better investment, 12% stock at par with an income tax at the rate of 5 paise per rupee or 1427%  stock at 120 free from income tax ?

Solution:
Let investment in each case = Rs. (100 × 120)
Income from 12% stock
= 12100×100×120    = Rs. 1440
Net income
= Rs. (14405100×1440)     = Rs. 1368
Income from 1427 % stock
= Rs. (1007×20×100×120)     = Rs. 1428.57
Clearly, 1427 % stock is better.

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