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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 government
security has been 7.8 percent in the last year. If the gains are to be divided equally, the gain per student is
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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