Professional Traders
(CAT 2008)
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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 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?
a. Bikram
b. Chetan
c. Abdul
d. Bikram or Chetan
e. cannot be determined
2. Which one of the following
statements is always true?
a. Abdul will not be one with the
minimum return
b. Return for Chetan will be
higher than that of Bikram
c. Return for Bikram will be
higher than that of Chetan
d. Return for Chetan cannot be
higher than that of Abdul
e. none of the above
3. On a “boom” day the share
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?
a. Bikram
b. Chetan
c. Abdul
d.
Abdul or Chetan
e.
cannot be determined
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.
i. Abdul lost money in the
transactions.
ii. Both Dane and Emily made
profits.
iii. There was an increase in
share price during the closing hour compared to the price at 2 pm.
iv. Share price at 12 noon was
lower than the opening price
4. Share price was at its
highest at
a. 10 am
b. 11 am
c. 12 noon
d. 1 pm
e. cannot be determined
5. Which of the following is
necessarily false?
a. Share price was at its lowest
at 2 pm
b. Share price was at its lowest
at 11 am
c. Share price at 1 pm was higher
than the share price at 2 pm
d. Share price at 1 pm was higher
than the share price at 12 noon
e.
none of the above
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