Question

The values of Stock A and Stock B on a particular day are Rs. 50 and Rs. 80, respectively. An investor invests Rs. 100 in Stock A and Rs. 80 in Stock B. He sells all the stocks the next day when the value of Stock A is Rs. 55 and Stock B is Rs. 70. The profit made by the investor is Rs. __________

• A. 0
• B. 5
• C. 10
• D. 20

Hint:

Find shares bought as investment divided by price, then compare total sale value to total investment for both stocks combined.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The investor buys shares of two stocks on day one and sells all of them on day two. Stock A costs Rs. 50 per share on day one and Rs. 55 per share on day two, while Stock B costs Rs. 80 per share on day one and Rs. 70 per share on day two. We are told the amount invested in each stock, and we need to find the total profit or loss after selling both holdings.

Step 2: Key Formula or Approach:
The number of shares bought in each stock is found by dividing the amount invested by the price per share on day one, that is, Number of shares = Amount invested / Price per share. The total money received on selling is then Number of shares multiplied by the selling price per share on day two, and the overall profit is the total amount received from selling both stocks minus the total amount originally invested.

Step 3: Detailed Explanation:
For Stock A, the investor puts in Rs. 100 when the price is Rs. 50 per share, so he buys \(\frac{100}{50} = 2\) shares. The next day these 2 shares are sold at Rs. 55 each, giving \(2 \times 55 = 110\). So Stock A alone gives a profit of \(110 - 100 = 10\).

For Stock B, the investor puts in Rs. 80 when the price is Rs. 80 per share, so he buys \(\frac{80}{80} = 1\) share. The next day this 1 share is sold at Rs. 70, giving \(1 \times 70 = 70\). So Stock B alone gives a loss of \(80 - 70 = 10\).

Adding the results of both stocks together, the profit of Rs. 10 from Stock A is exactly cancelled out by the loss of Rs. 10 from Stock B, so the net result is \(10 - 10 = 0\).

Checking the other options, 5, 10 and 20 would only appear if the profit and loss from the two stocks were not combined correctly, for instance by only considering one stock or by adding instead of netting the two results, so they do not represent the actual combined profit.

Step 4: Final Answer:
Since the Rs. 10 profit on Stock A is exactly offset by the Rs. 10 loss on Stock B, the investor's total profit is zero.
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