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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 stock at 120 free from income tax ?
Income from 12% stock
= = Rs. 1440
Net income
= Rs. = Rs. 1368
Income from % stock
= Rs. = Rs. 1428.57
Clearly, % stock is better.
Solution:
Let investment in each case = Rs. (100 × 120)Income from 12% stock
= = Rs. 1440
Net income
= Rs. = Rs. 1368
Income from % stock
= Rs. = Rs. 1428.57
Clearly, % stock is better.