Indian Institute of Foreign Trade 2009 Solved Paper

Question : 7 of 122

Marks: +1, -0

Which fund has received more return per rupee of investment for one year period?

Alpha
Beta
Gama
Both Beta and Gama gives same return

Solution:

As the numbers are far apart we can approximate the money allocation data to the nearest multiple of 0.5. The money allocation data can be approximated as below

SI.No	Sectors	Money Allocation			Sectoral Return
SI.No	Sectors	Alpha	Beta	Gama	Sectoral Return
1	Automobiles	1.50	6.00	0.00	5%
2	Chemicals	3.00	2.00	5.00	12%
3	Communication	7.00	5.00	4.00	-5%
4	Construction	1.50	0.00	6.00	15%
5	Diversified	7.50	7.00	9.50	11%
6	Energy	10.00	17.50	20.50	21%
7	Engineering	9.00	11.00	15.50	8%
8	Financial	26.00	24.00	17.00	6%
9	FMCG	14.50	2.00	2.00	25%
10	Health Care	6.00	0.00	3.00	18%
11	Metals	0.00	11.00	10.00	-8%
12	Services	4.50	7.00	4.00	10%
13	Technology	5.50	7.50	3.50	-2%
14	Textiles	4.00	0.00	0.00	17%
		100.00	100.00	100.00

Let us assume that Rs. 100 is invested in each fund.
Total return on investing Rs. 100 in fund Alpha

=1.5∗1.05+3∗1.12+7∗.95+1.5∗1.15+7.5∗1.11+10∗1.21+9∗1.08+26∗1.06+14.5∗1.25+6∗1.18+4.5∗1.10+5.5∗.98+4∗1.17=\Rs.111.24.

Hence, net return per rupee in fund Alpha

=111.24/100=\Rs=1.1124

Similarly, we can calculate total return on investing Rs. 100 in fund Beta and Gama.
Net return per rupee in fund Beta

=107.225/100=\Rs.1.07225

Net return per rupee in fund Gama

=109.48/100=\Rs.1.0948

We can see that return per rupee is the highest for Alpha fund. Hence, option A is the correct answer

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