Abdul, Bikram and Chetan are three professional traders who trade in shares of a company XYZ Ltd. Abdul follows the strategy of buying at the opening of the day at 10 am and selling the whole lot at the close of the day at 3 pm. Bikram follows the strategy of buying at hourly intervals: 10 am, 11 am, 12 noon, 1 pm and 2 pm, and selling the whole lot at the close of the day. Further, he buys an equal number of shares in each purchase. Chetan follows a similar pattern as Bikram but his strategy is somewhat different. Chetan‟s total investment amount is divided equally among his purchases. The profit or loss made by each investor is the difference between the sale value at the close of the day less the investment in purchase. The “return” for each investor is defined as the ratio of the profit or loss to the investment amount expressed as a percentage.
1. On a “boom” day the price of XYZ Ltd. keeps rising throughout the day and peaks at the close of the day. Which trader got the minimum return on that day?
(1) Bikram (2) Chetan (3) Abdul (4) Abdul or Chetan (5) cannot be determined
2. On a day of fluctuating market prices, the share price of XYZ Ltd. ends with a gain, i.e., it is higher at the close of the day compared to the opening value. Which trader got the maximum return on that day?
(1) Bikram (2) Chetan (3) Abdul (4) Bikram or Chetan (5) cannot be determined
3. Which one of the following statements is always true?
(1) Abdul will not be the one with the minimum return
(2) Return for Chetan will be higher than that of Bikram
(3) Return for Bikram will be higher than that of Chetan
(4) Return for Chetan cannot be higher than that of Abdul
(5) none of the above
One day, two other traders, Dane and Emily joined Abdul, Bikram and Chetan for trading in the shares of XYZ Ltd. Dane followed a strategy of buying equal numbers of shares at 10 am, 11 am and 12 noon, and selling the same numbers at 1 pm, 2 pm and 3 pm. Emily, on the other hand, followed the strategy of buying shares using all her money at 10 am and selling all of them at 12 noon and again buying the shares for all the money at 1 pm and again selling all of them at the close of the day at 3 pm. At the close of the day the following was observed:
- Abdul lost money in the transactions.
- Both Dane and Emily made profits.
- There was an increase in share price during the closing hour compared to the price at 2 pm.
- Share price at 12 noon was lower than the opening price.
4. Which of the following is necessarily false?
(1) Share price was at its lowest at 2 pm
(2) Share price was at its lowest at 11 am
(3) Share price at 1 pm was higher than the share price at 2 pm
(4) Share price at 1 pm was higher than the share price at 12 noon
(5) none of the above
5. Share price was at its highest at
(1) 10 am (2) 11 am (3) 12 noon (4) 1 pm (5) cannot be determined