Discussion
Find the market value of the stock if 6% yields 10%.
Answer: A
In stock problems, a "\( r\% \) stock at \( m \)" means Rs. 100 of face value costs Rs. \( m \) and pays Rs. \( r \) a year, so the yield on money invested is \( \tfrac{r}{m} \).
\[ \frac{6}{m} = 10\% \quad\Longrightarrow\quad m = \frac{6}{0.10} = \text{Rs. } 60 \]
The yield exceeds the dividend rate, so the stock must be quoted below par.
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