Wednesday 2 November 2011

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 4th year, B is the better investment-plan.
Answer (2)

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