Which of the following is the least attractive scheme?

Options

A. `4%` Rs.40 shares at Rs.50.
B. `5%` Rs.50 shares at Rs.60
C. `6%` Rs.60 shares at Rs.70
D. `7%` Rs.70 shares at Rs.80

Answer

A

Explanation

`"Rate of return"=("Face value"xx"Rate of dividend")/("Market value")`
Choice (a) : `"Rate of return"=(40xx4%)/(50)`
`=(16)/(6)%`
Choice (b) : `"Rate of return"=(50xx5%)/(60)`
`=(25)/(6)%`
Choice (c) : `"Rate of return"=(60xx6%)/(70)=(36)/(7)%`.
Choice (d) : `"Rate of return"=(70xx7%)/(80)`
`=(49)/(8)%`.
`therefore` The least attractive scheme is choice (1), since it the yield the least rate of return.