No, they do not have to be midpoints. In a parallelogram ABCD, choosing points dividing opposite sides in equal ratios (like AP = CR = 1/3 AB and BQ = DS = 1/3 BC) creates an inscribed parallelogram that is not formed by midpoints.
Class 9 Ganita Manjari Part 2 chapter 12 Quadrilaterals solutions
Class 9 Ganita Manjari Part 2 book Solutions
No, P, Q, R and S need not be the midpoints of the sides. For example, take any parallelogram ABCD and choose points P, Q, R, S such that AP = CR = 1/3 AB and BQ = DS = 1/3 BC. Then △APS ≅ △CRQ and △PBQ ≅ △RDS by SAS congruence, which forces PQRS to be a parallelogram even though none of the points are midpoints.
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