Question 52

Students of an MBA school have got together to constitute a fund where each student has contributed Rs. 10000. This group of 20 students laid down certain rules for investment where it was agreed that 50 percent of the fund would be invested in riskless government securities while the rest 50 percent would be invested in equities. At the end of the year the group realizes that the crash in the stock market has left them with zero return on equities but 1 percent dividend gain on the shares bought. The return on the riskless governmentsecurity has been 7.8 percent in the last year. If the gains are to be divided equally, the gain per student is

Solution

Total fund collected by 20 students = 20*10000 = 2,00,000

Investment in riskless government securities = 2,00,000*$$\ \frac{\ 50}{100}$$ = 100000

Investment in equities = 2,00,000 -  1,00,000 = 1,00,000

Gain by equities = 1,00,000*$$\ \frac{\ 1}{100}$$ = 1000

Gain by riskless government securities = 1,00,000*$$\ \frac{\ 7.8}{100}$$ = 7800

Total gain = 1000+7800 = 8800

gain/student = $$\ \frac{\ 8800}{20}$$ = 440

Gain% = $$\ \frac{\ 440}{10000}\times\ 100$$

= 4.4%

B is the correct answer.

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