Instructions

Directions for the following five questions: Answer the following questions based on the information given below:

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, 11am, 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.

Question 46

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 priceShare price was at its highest at

Solution

Let the share prices at 10,11,12,1,2,3 be p,q,r,s,t,u
Since Abdul lost all money, p>u
From Dane it can be observed, s+t+u>p+q+r
p>r and u>t
From Emily it can be observed, r+u>p+s
From these inequalities it can be inferred that the p is the highest.