Instructions

Two traders, Chetan and Michael, were involved in the buying and selling Of MCS shares over five trading days. At the beginning of the first day, the MCS share was priced at Rs 100, while at the end of the fifth day it was priced at Rs 110. At the end of each day, the MCS share price either went up by Rs 10, or else, it came down by Rs 10. Both Chetan and Michael took buying and selling decisions at the end of each trading day. The beginning price of MCS share on a given day was the same as the ending price of the previous day. Chetan and Michael started with the same number of shares and amount of cash, and had enough of both. Below are some additional facts about how Chetan and Michael traded over the five trading days.

• Each day if the price went up, Chetan sold 10 shares of MCS at the closing price. On the other hand, each day if the price went down, he bought 10 shares at the closing price.

• If on any day, the closing price was above Rs 110, then Michael sold 10 shares of MCS, while if it was below Rs 90, he bought 10 shares, all at the closing price.

Question 36

If Chetan sold 10 shares of MCS on three consecutive days, while Michael sold 10 shares only once during the five days, what was the price of MCS at the end of day 3?

Solution

The above table includes the values of the share price at the end of each day. Chetan and Michael column shows the number of shares at the end of 5th day with Chetan and Michael respectively. (-10 means he has sold 10 shares, +10 means he has bought 10 shares)

there are 10 different possible cases according to the initial and final share price.

The question asks about the case where Chetan has sold 3 times and Michael sells only once.

Starting with Michael, for exactly one sell, the price should touch 120 only once as Michael sells the share only at price greater than 110.

 if the price touches 120 twice or more, Michael will sell the share more than once which is not a desirable case.

Also, chetan has to sell thrice consecutively which is only possible if the share price is 90 at one instance and rises to 120 in straight 3 days.

This is only possible in case 2. Hence the price on 3rd day's end in case 2 is 110.

Video Solution

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