Multiple choice

Marketable lots are 25 shares in the market. Mr. Amen has Rs. 25000 surplus amount to invest for a year in stocks or other investment plans. He has five options: (A) 10%, Rs.100 shares at Rs. 125 (B) 12%, Rs. 80 shares at Rs. 100. (C) 15%, Rs. 200 shares at Rs. 250. (D) Simple interest at the rate of 18% (E) Compound interest of 10% compounded bi-annually. The best investment plan is

  1. A

  2. B

  3. C

  4. D

  5. E
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Compare effective annual yields: (A) 10% dividend on Rs. 125 = 8%. (B) 12% on Rs. 80 = 12/80 = 15%. (C) 15% on Rs. 250 = 15/250 = 6%. (D) Simple interest = 18%. (E) 10% compounded bi-annually = (1 + 0.05)^2 - 1 = 10.25%. 18% is the highest.

AI explanation

To find the best plan, we calculate the annual yield for each option. Plan A yields 8 percent, plan B yields 9.6 percent, plan C yields 6 percent, and plan D yields 18 percent. Plan E yields an effective annual rate of 10.25 percent because it compounds bi-annually at 10 percent, calculated as 1.05 squared minus 1. Since simple interest at 18 percent provides the highest annual return, plan D is the best investment.

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