Direction: Read the data carefully and answer the question. Note: (i) Market…
2021
Direction: Read the data carefully and answer the question.
Note: (i) Market value = Total number of shares × Price of one share.
(ii) Number of shares increased by 20% from 2001 to 2002, and price of a share decreased by 5% from 2002 to 2003.
(iii) Price of a share decreased by 12% from 2005 to 2006, and number of shares decreased by 10% from 2005 to 2006.
Find the total market value in 2006.
- A.
24,75,000
- B.
24,55,000
- C.
24,25,000
- D.
23,95,000
- E.
24,95,000
Show answer & explanation
Correct answer: A
Concept
Market value of a stock for a year is the product of two independent quantities: the number of shares held and the price of a single share, i.e. Market value = (Number of shares) × (Price per share).
When a base quantity changes by a given percentage, the new value is the base multiplied by (1 ± rate). A 10% decrease multiplies the base by 0.90; a 12% decrease multiplies it by 0.88.
Application
Read the two charts for the year 2006. The price chart gives the price per share in 2006 directly as Rs 110.
The number of shares is charted only for 2001, 2003 and 2005, so the 2006 count must be derived. The 2005 count is 25000.
By Note (iii), the number of shares decreased by 10% from 2005 to 2006: Shares in 2006 = 25000 × (1 − 0.10) = 25000 × 0.90 = 22500.
Apply the market-value formula for 2006: Market value = 22500 × 110 = 2475000, i.e. 24,75,000.
Cross-check
The 2006 price 110 is taken straight from the price chart, consistent with Note (iii) (a 12% drop from a 2005 price of 125 gives 125 × 0.88 = 110). The 10% share fall is the only adjustment needed because every other note describes earlier years, so it does not affect 2006. The product 22500 × 110 = 2475000 matches the value 24,75,000.