12 thoughts on “Weighted Averages – CAT Scan

  1. Dear J,
    This application using graphs was not very intuitive for me (personally) 😦 . Although you told that the ratio of their bases will govern their weights, but i’m just accepting it as it is, coz i’m not a fairly acquainted with this graphing technique 😦 . Can we some more questions and/or articles where we can learn these graphing techniques along with other concepts? I’ll be indebted if do so.

    • This was more of Geometry really (similarity of triangles!)…I don’t really have any similar questions but am trying to come up with a set of posts on graphing approaches in general (mods/quadratics etc), so far don’t have a coherent plan in place for that. It is surprisingly difficult to explain on paper, it turns out….

      regards
      J

      • Dear J,
        Other graphing techniques are fine like drawing a graph for MOD(2x-3), but I meant graphing where in we have to picturize some data (like the example above) rather than an algebraic expression. Percentage of B v/s C on a horizontal line (how does it come to mind). I want to learn that. 😦 Please do something.

  2. Sir, I have a doubt. I started trying without goin thru solution first.

    as Shabnam can fully utilize or partially utilize…. I assumed w1,w2 and w3 as weights. I end up with the equation: (w1*0.1% + w2*1% – w3*0.25%) / (w1+w2+w3). [I assumed 50% probability for rise and fall of market].

    So I thought, in the numerator if I equalize the first term and the second term, I ll get the more return. Equalizing I found, w1:w2 :: 25:1, from this I got the total return as 0.78%.

    I know my approach is wrong, If you could point out where it is.

    Regards,
    RZ

    • The second weightage should be either 1 or 0. Either invest fully in that option or not at all 🙂 Because that is a “guaranteed return”. The others are changing and hence a combination of them might make more sense (this being a simplified version of what the Finance folks call hedging)

      regards
      J

  3. Sir,
    Could one try to solve such a question in a different way, i.e., instead of using the graphing technique. I tried to, but, couldn’t get my head around it.
    Thank You

    • Of course! You can solve it with equations as well (in fact that is how I solved this problem the first time I saw it – it is slightly slower but I didn’t spot this approach on that day!). The thing is, there will always be many ways to solve any given question; the more you know, the more likely you are to spot an efficient way to get an accurate answer.

      regards
      J

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