Discussion
What percentage return does an investor obtain by buying 15% stock at 125 ?
Answer: B
Correct answer: 12%
Rs. 125 buys Rs. 100 of stock, which pays Rs. 15 a year.
\[\text{Yield} = \frac{15}{125} \times 100 = 12\%\]
Buying above par lowers the effective return below the nominal 15%, which is the mirror image of buying at a discount.
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