Instructions

Venkat, a stockbroker, invested a part of his money in the stock of four companies --- A, B, C and D. Each of these companies belonged to different industries, viz., Cement, Information Technology (IT), Auto, and Steel, in no particular order. At the time of investment, the price of each stock was Rs.100. Venkat purchased only one stock of each of these companies. He was expecting returns of 20%, 10%, 30%, and 40% from the stock of companies A, B, C and D, respectively. Returns are defined as the change in the value of the stock after one year, expressed as a percentage of the initial value. During the year, two of these companies announced extraordinarily good results. One of these two companies belonged to the Cement or the IT industry, while the other one belonged to either the Steel or the Auto industry. As a result, the returns on the stocks of these two companies were higher than the initially expected returns. For the company belonging to the Cement or the IT industry with extraordinarily good results, the returns were twice that of the initially expected returns. For the company belonging to the Steel or the Auto industry, the returns on announcement of extraordinarily good results were only one and a half times that of the initially expected returns. For the remaining two companies, which did not announce extraordinarily good results, the returns realized during the year were the same as initially expected.

Question 45

What is the minimum average return Venkat would have earned during the year?

Solution

For the average profit to be minimum, the companies with returns higher than the initially expected returns have to be the companies with the least expected returns. 

So, the company with twice the initially expected returns has to be the company that was expected to return 10%. So, the returns now become 20%.

The company with one and a half times the initially expected returns has to be the company with the next least expected results, which is 20%. So, the returns now become 30%.

The companies with 30% and 40% expected results got the same as the expected results.

The average overall profit can be calculated as,

 $$\dfrac{20\ +\ 30\ +\ 30\ +\ 40}{4}\ =\ 30\%$$

The minimum average return during the year for Venkat would be 30%.

Hence, the correct answer is option A.

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