Q.A share of face value ₹10 is available at a discount of ₹2, paying a 9% dividend. Find the yield on this investment.

A discount is subtracted from the face value to get the market value actually paid, which is what yield is calculated on.

Market value at a discount of ₹2

Dividend per share

Yield

$\text{Yield \%} = \frac{0.90}{8}\times100 = \frac{90}{8} = 11.25\%$ …

Adding the discount to the face value instead of subtracting it (treating ₹2 as if it were a premium), which would wrongly use a market value of ₹12 instead of ₹8 and understate the true yield. Buying at a discount always makes yi …