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An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?
Correct answer is '1073600'. Can you explain this answer?
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Verified Answer
An investor is faced with a dilemma about where to invest his savings ...
To make the calculation easier, let us take the amount the investor wants to invest as x.
Scheme A :
Amount of the investment after 2 years, a2 = x * (1.1)2 = 1.21x
Amount of investment after 5 years, a5 = 1.21x * (1 + (0.2 x 3)) = 1.936x
Since the increase is more than 60%, the additional 10% won’t be added to it.
Scheme B :
Amount of investment after 2 years, b2 = x * (1 + (0.1 x 2)) = 1.2x
Amount of investment after 5 years, b5 = 1.2x (1.2)3 = 2.0736x
Since the increase is more than 50%, the additional 15% won’t be added to it.
After looking at the interest earned, we can say that the investor should choose scheme B.
Amount earned by the investor = 106
×(2.0736−1)=1073600
Scheme A :
Amount of the investment after 2 years, a2 = x * (1.1)2 = 1.21x
Amount of investment after 5 years, a5 = 1.21x * (1 + (0.2 x 3)) = 1.936x
Since the increase is more than 60%, the additional 10% won’t be added to it.
Scheme B :
Amount of investment after 2 years, b2 = x * (1 + (0.1 x 2)) = 1.2x
Amount of investment after 5 years, b5 = 1.2x (1.2)3 = 2.0736x
Since the increase is more than 50%, the additional 15% won’t be added to it.
After looking at the interest earned, we can say that the investor should choose scheme B.
Amount earned by the investor = 106
×(2.0736−1)=1073600
Most Upvoted Answer
An investor is faced with a dilemma about where to invest his savings ...
Solution:
Scheme A:
- Principal amount = 10 lakhs
- Interest rate for first 2 years = 10% compounded annually
- Interest rate for next 3 years = 20% simple interest
- If amount has increased less than 60%, additional 10% is added to it
Using compound interest formula, we can calculate the amount after 2 years:
Amount after 2 years = 10 lakhs * (1 + 10/100)^2 = 12.1 lakhs
Using simple interest formula, we can calculate the interest amount for 3 years:
Interest amount for 3 years = 10 lakhs * 20/100 * 3 = 6 lakhs
Total amount after 5 years = 12.1 lakhs + 6 lakhs = 18.1 lakhs
Since the amount has increased less than 60%, an additional 10% is added to it:
Additional amount = 18.1 lakhs * 10/100 = 1.81 lakhs
Total amount after additional 10% = 18.1 lakhs + 1.81 lakhs = 19.91 lakhs
Scheme B:
- Principal amount = 10 lakhs
- Interest rate for first 2 years = 10% simple interest
- Interest rate for next 3 years = 20% compounded annually
- If amount has increased less than 50%, additional 15% is added to it
Using simple interest formula, we can calculate the amount after 2 years:
Amount after 2 years = 10 lakhs + (10 lakhs * 10/100 * 2) = 12 lakhs
Using compound interest formula, we can calculate the amount after 3 years:
Amount after 3 years = 12 lakhs * (1 + 20/100)^3 = 20.736 lakhs
Since the amount has increased more than 50%, no additional amount is added.
Comparing the total amounts from both schemes, we can see that Scheme A gives a higher return:
Total amount from Scheme A = 19.91 lakhs
Total amount from Scheme B = 20.736 lakhs
Therefore, the investor should choose Scheme A.
Earnings over initial investment:
Earnings = Total amount - Principal amount
Earnings = 19.91 lakhs - 10 lakhs
Earnings = 9.91 lakhs
Therefore, the investor earns 9.91 lakhs over his initial investment of 10 lakhs. Converted to rupees, the answer is 1073600.
Scheme A:
- Principal amount = 10 lakhs
- Interest rate for first 2 years = 10% compounded annually
- Interest rate for next 3 years = 20% simple interest
- If amount has increased less than 60%, additional 10% is added to it
Using compound interest formula, we can calculate the amount after 2 years:
Amount after 2 years = 10 lakhs * (1 + 10/100)^2 = 12.1 lakhs
Using simple interest formula, we can calculate the interest amount for 3 years:
Interest amount for 3 years = 10 lakhs * 20/100 * 3 = 6 lakhs
Total amount after 5 years = 12.1 lakhs + 6 lakhs = 18.1 lakhs
Since the amount has increased less than 60%, an additional 10% is added to it:
Additional amount = 18.1 lakhs * 10/100 = 1.81 lakhs
Total amount after additional 10% = 18.1 lakhs + 1.81 lakhs = 19.91 lakhs
Scheme B:
- Principal amount = 10 lakhs
- Interest rate for first 2 years = 10% simple interest
- Interest rate for next 3 years = 20% compounded annually
- If amount has increased less than 50%, additional 15% is added to it
Using simple interest formula, we can calculate the amount after 2 years:
Amount after 2 years = 10 lakhs + (10 lakhs * 10/100 * 2) = 12 lakhs
Using compound interest formula, we can calculate the amount after 3 years:
Amount after 3 years = 12 lakhs * (1 + 20/100)^3 = 20.736 lakhs
Since the amount has increased more than 50%, no additional amount is added.
Comparing the total amounts from both schemes, we can see that Scheme A gives a higher return:
Total amount from Scheme A = 19.91 lakhs
Total amount from Scheme B = 20.736 lakhs
Therefore, the investor should choose Scheme A.
Earnings over initial investment:
Earnings = Total amount - Principal amount
Earnings = 19.91 lakhs - 10 lakhs
Earnings = 9.91 lakhs
Therefore, the investor earns 9.91 lakhs over his initial investment of 10 lakhs. Converted to rupees, the answer is 1073600.
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An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?Correct answer is '1073600'. Can you explain this answer?
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An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?Correct answer is '1073600'. Can you explain this answer? for CAT 2024 is part of CAT preparation. The Question and answers have been prepared according to the CAT exam syllabus. Information about An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?Correct answer is '1073600'. Can you explain this answer? covers all topics & solutions for CAT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?Correct answer is '1073600'. Can you explain this answer?.
An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?Correct answer is '1073600'. Can you explain this answer? for CAT 2024 is part of CAT preparation. The Question and answers have been prepared according to the CAT exam syllabus. Information about An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?Correct answer is '1073600'. Can you explain this answer? covers all topics & solutions for CAT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An investor is faced with a dilemma about where to invest his savings of 10 lakhs. Scheme A gives 10% interest compounded annually for 2 years and simple interest of 20% for the next 3 years. If the amount has increased less than 60%, additional 10% is also added to it. Scheme B gives a simple interest of 10% for 2 years and compound interest of 20% for 3 years compounded annually. If the amount has increased less than 50%, additional 15% is added to it. If the investor goes with the right choice, how much does he earn over his initial investment ?Correct answer is '1073600'. Can you explain this answer?.
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