Comprehension

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 percent age.

Question: 1

On a day of fluctuating market prices, the share price of XYZ Ltd. ends with a gain compared to opening value. Which trader got the maximum return on that day?

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If price rises overall, buying all at lowest price of day maximizes percentage return.
Updated On: Aug 11, 2025
  • Bikram
  • Chetan
  • Abdul
  • Bikram or Chetan
  • cannot be determined
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The Correct Option is C

Solution and Explanation

Abdul invests entire capital at day’s open price; if price rises by close, his return is based on buying all at the lowest point of day (opening price). Bikram and Chetan buy in intervals, some at higher prices during the day, lowering return compared to Abdul in a net-gain day.
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Question: 2

Which statement is always true?

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Compare average buying price effects: equal money buys fewer shares when prices are high.
Updated On: Aug 11, 2025
  • Abdul will not be one with the minimum return
  • Return for Chetan will be higher than that of Bikram
  • Return for Bikram will be higher than that of Chetan
  • Return for Chetan cannot be higher than that of Abdul
  • none of the above
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The Correct Option is D

Solution and Explanation

Chetan’s buy pattern mimics Bikram’s but invests equal money per slot, meaning fewer shares bought at lower prices and more at higher prices, lowering return potential vs Abdul’s single bulk buy at lowest daily price (opening). Thus, Abdul’s return ≥ Chetan’s always.
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Question: 3

On a “boom” day the share price rises all day to peak at close. Which trader got the minimum return?

Show Hint

Equal monetary investments over rising prices push average purchase price up, lowering returns.
Updated On: Aug 11, 2025
  • Bikram
  • Chetan
  • Abdul
  • Abdul or Chetan
  • cannot be determined
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The Correct Option is B

Solution and Explanation

In a boom day: - Abdul buys all at open price — lowest of the day — max possible return.
- Bikram buys shares each hour; average price higher than Abdul’s but lower than Chetan’s effective avg.
- Chetan invests equal money at each slot, buying fewer shares early (low price) and more later (high price), pushing his average price highest, lowering return the most.
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