CAT 2007 Question 7

Instructions

Directions for the following two questions: Shabnam is considering three alternatives to invest her surplus cash for a week. She wishes to guarantee maximum returns on her investment. She has three options, each of which can be utilized fully or partially in conjunction with others.

Option A: Invest in a public sector bank. It promises a return of +0.10%.

Option B: Invest in mutual funds of ABC Ltd. A rise in the stock market will result in a return of +5%, while a fall will entail a return of – 3%.

Option C: Invest in mutual funds of CBA Ltd. A rise in the stock market will result in a return of – 2.5%, while a fall will entail a return of + 2%.

Question 7

The maximum guaranteed return to Shabnam is


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