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.
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?
Show Hint
- Bikram
- Chetan
- Abdul
- Bikram or Chetan
- cannot be determined
The Correct Option is C
Solution and Explanation
Which statement is always true?
Show Hint
- 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
The Correct Option is D
Solution and Explanation
On a “boom” day the share price rises all day to peak at close. Which trader got the minimum return?
Show Hint
- Bikram
- Chetan
- Abdul
- Abdul or Chetan
- cannot be determined
The Correct Option is B
Solution and Explanation
- 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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