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Problem-2 (Strategy based)

In general, the values of all the major scrips change in proportion to the stock market Sensex Index.
 
Until 3 weeks ago, John’s stock trading strategy had been to buy some of the major scrips at random, and generally his profit or loss has been proportional to the further growth or loss in the index value. Three weeks ago, a stock tips company named ST offered John a service that would every week name the scrips that would perform better for those weeks. John subscribed to a 4-week for the service. John has to decide whether to continue with the service at the end of the fourth week. The performances of the stocks named by ST for the past three weeks have been tabulated below, and the Index performance has also been listed. John is in his final week of the evaluation.
 
The company suggested that John spend an equal amount on each of the scrips suggested each week.

John will continue with the service provided he sees a better return with the company than with his usual strategy. If he does not see a better return, he will re-think continuing with the service.
 

Week

Market Sensex

(In percentage)

Scrip suggestion 1

(In percentage)

Scrip suggestion 2

(In percentage)

Scrip suggestion 3

(In percentage)

Scrip Suggestion 4

(In percentage)

Current Week minus 3

2.3

2.43

2.2

2.5

No suggestion

Current Week minus 2

1.8

2.11

1.1

2.3

2.3

Current Week minus 1

–0.5

0.9

0.03

0.1

No suggestion

Current Week

Under evaluation

Under evaluation

Under evaluation

Under evaluation

Under evaluation

  1. Which of the following records for the fourth week if they are realized would prompt John continue with the ST tips and which would make him re-think?
Yes No -1.5%
–1.5%, –2.3%, 0.3%, 0.5%, None
–2%, –4.1%, –5.3%, 3%, 4.2%
–2%, –5%, –4%, 1%, 1%
–4%, 4%, 0%, 0%, –4%
5%, 3%, 0%, 3%, None

Solution-2 (Strategy based)

  1. Let’s evaluate the results for John’s usual investment strategy and the investments suggested by ST. Summarizing yields
Week
Index—John’s usual results
Scrip 1
Scrip 2
Scrip 3
Scrip 4
ST Method of Investment
Current Week minus 3
2.3%
2.43%
2.2%
2.5%
No suggestion
Current Week minus 2
1.8%
2.11%
1.1%
2.3%
2.3%
Current Week minus 1
–0.4%
-0.9%
0.03%
-0.5%
No suggestion
Total
 
 
 
 
2.37 + 1.95 - 0.45 = 3.87

Hence, ST has been yielding 3.87 – 3.7 = 0.17% in the last 3 weeks. Now the problem can be restated as

 
Proceed
Is ST performance in the row > Index + 0.17%
Re-think
Is ST performance in the row ≤ Index + 0.17%
Index ST current week performance
-1.5%
ST performance is lower index minus 0.17-creates doubt. John has to re-think ST.
-2%
ST performance is better. John can proceed with ST.
-2%
ST performance is lower than index minus 0.17—creates doubt. John has to re-think ST.
-4%
The ST performance –1.33% is better than  the Index performance –4%, though both are negative—John can proceed with ST.
 
Note, if you did not selected this choice because ST performance is negative, you have not recognized the criterion of the strategy problem precisely. The criterion mentioned for John to continue is that ST performance must be better than Index Performance.
5%
ST performance is lower than index minus 0.17—creates doubt. John has to re-think ST.

 

Note, here we have two scenarios—One is Index scenario and the other is the ST scenario. Comparing them and generating an integrated view is an Integrated Reasoning activity.

 

Note the link in the problem is "scrips"—protocol to describe the integration scenario is a simple table.

 

Try to determine, what other integration activities you can find in the real world!




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