Question

12. Robert bought shares of 6% $100 face value at a price of $120. Sam bought shares of 8% $20 face value at $30. Whose investment was better?

Answer 1

6% $ 100 shares at $ 120

i.e., the annual income from 1 share of nominal value $ 100 is $ 6, investment for 1 share being $ 120.

Therefore, profit percentage = 6/120 × 100 % = 5%

Therefore, Robert’s shares give him a profit of 5%

8 % $ 20 shares at $ 30

i.e., the annual income from 1 share of nominal value $ 20 is $ (8×20)/100 = $ 85, investment for 1 share being $ 30.

Profit percentage = [$(8/5)/$30] × 100 %

= 16/3 %

Therefore, Adrian’s shares give him a profit of 16/3% >5%

Therefore, Adrian’s investment was better.