Q.Which is the better investment: Company P — face value ₹20, dividend rate 10%, market value ₹18 (at a discount); or Company Q — face value ₹20, dividend rate 8%, market value ₹16 (at a discount)?

Compare the two companies by yield, not by their dividend rates, since both are bought at a discount to different degrees.

Company P

Dividend per share $=\dfrac{10}{100}\times20=₹2$.

Company Q

Dividend per share $=\dfrac{8}{100}\times20=₹1.60$.

Comparison: Company P's yield ($\approx11.11\%$) exceeds Company Q's yield ($10\%$), so P is the better investment, even though both companies have the same face value and both are bought at a discount. …

Assuming the company with the higher discount (Q, discounted by ₹4 vs P's ₹2) is automatically the better buy, without actually computing yield — the size of a discount a …