Arithmetic-17 (XAT-2009)

Mungerilal has two investment plans- A and B, to choose from. Plan A offers interest of 10% compounded annually while plan B offers simple interest of 12% per annum. Till how many years is plan-B a better investment?

(1) 3   (2) 4  (3) 5  (4) 6  (5) 7

Answer follows here:

Solution:

See the table below, for plan-wise calculations of accumulative amounts:

	A	B
	Accumulated Value	Accumulated Value
After 1st Year	100(1.1) = 110	100+12 = 112
After 2nd Year	110(1.1) = 121	112+12 = 124
After 3rd Year	121(1.1) = 133.1	124+12 = 136
After 4th Year	(133.1)(1.1) = 146.41	136+12 = 148
After 5th Year	(146.41)(1.1) = 161.051	148+12 = 160

Till end of 4^th year, B is the better investment-plan.

Answer (2)