Net yield when purchasing at par value What rate of interest (effective yield) is obtained by investing in a 9 1/2% stock at par (price = 100)?

Introduction / Context:When a stock is purchased at par (market price equals face value), the investor’s yield equals the stated dividend (coupon) rate. This question checks that recognition without extra steps for premium, discount, or brokerage.

Given Data / Assumptions:

• Dividend rate = 9.5% per Rs. 100 nominal.
• Purchase price at par ⇒ Rs. 100 per Rs. 100 nominal.
• No brokerage or taxes considered.

Concept / Approach:Yield (%) = (Dividend per 100 / Cost per 100) * 100. At par, Cost per 100 = 100, Dividend per 100 = 9.5, so yield is simply 9.5%.

Step-by-Step Solution:Dividend per 100 = Rs. 9.50.Cost per 100 = Rs. 100.Yield = (9.50 / 100) * 100 = 9.5% = 9 1/2%.

Verification / Alternative check:No adjustments are needed for par purchases; any premium would reduce yield, any discount would increase yield compared to the coupon rate. Here neither applies.

Why Other Options Are Wrong:Values like 8 1/2%, 9 1/3%, or 10% would require a non-par purchase price or additional charges, none of which are given.

Common Pitfalls:Overcomplicating the scenario by introducing premiums/discounts when the problem clearly states “at par”.

Final Answer:9 1/2%