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Discussion Forum : Line Charts - Line Chart 8 (Q.No. 4)
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Two different finance companies declare fixed annual rate of interest on the amounts invested with them by investors. The rate of interest offered by these companies may differ from year to year depending on the variation in the economy of the country and the banks rate of interest. The annual rate of interest offered by the two Companies P and Q over the years are shown by the line graph provided below.

Annual Rate of Interest Offered by Two Finance Companies Over the Years.

4.
An investor invested a sum of Rs. 12 lakhs in Company P in 1998. The total amount received after one year was re-invested in the same Company for one more year. The total appreciation received by the investor on his investment was?
Rs. 2,96,200
Rs. 2,42,200
Rs. 2,25,600
Rs. 2,16,000
Answer: Option
Explanation:

Amount received from Company P after one year (i.e., in 199) on investing Rs. 12 lakhs in it

= Rs. [12 + (8% of 12)] lakhs

= Rs. 12.96 lakhs.

Amount received from Company P after one year on investing Rs. 12.96 lakhs in the year 1999

= Rs. [12.96 + (10% of 12.96)] lakhs

= Rs. 14.256.

Appreciation received on investment during the period of two years

= Rs. (14.256 - 12) lakhs

= Rs. 2.256 lakhs

= Rs. 2,25,600.

Discussion:
12 comments Page 1 of 2.
Sss said:   2 years ago
I have a doubt about the rate of interest for the company, since we have to use for the same company then 10% must be used for both the times. But instead in the solution, first time 8% and then 10% is used.
Please explain this!
(1)
Tayyor said:   5 years ago
Total amount = Principal + Interest.

For Year1(1998);

The interest (amount) gained from an investment of 12L will be 8% * 12 =0.96L
Total amount for year1 = Principal + Interest
= 0.96L+12L
= 12.96L (Since it was rolled over this wld be principal for Yr2 Investment).

The interest (amount) gained from an investment of 12.96L will be 10% * 12.96 =1.296L
Total amount for year2 = Principal + Interest.
= 12.96L+1.296L
= 14.256L.

Therefore Total appreciation or interest gained on an investment of 12L over the period of 2 yrs will be;

Interest = Total amount - Principal.
= 14.256L - 12L,
= 2.256.
(2)
Moin Khan Mondal said:   6 years ago
Total amount =p(1+R1/100)(1+R2/100)=1200000(1+8/100)(1+10/100)=1425600.

The answer is = 1425600-1200000 = 225600.
(1)
Yagnas said:   7 years ago
Instead of appreciation, here interest would be the correct word.
(1)
Sheena said:   9 years ago
Thanks for the explanation @Pratik.
(1)
Hemjit said:   9 years ago
An easier way:

Net interest rate: 8+10+(8*10/100) = 18.8% -- this would be the combined interest for two years.

Interest or appreciation: 12 * 18.8/100 = 225.6/100 = 2.256.
(2)
Ravisha said:   9 years ago
Thank you all for the explanation.
Pratik said:   9 years ago
Initial = 1200000, interest in year 1998 = 0.08,
So interest amount received = 96000 (= 1200000 * 0.08) .
Net amount after investment = 1296000 (=1200000 + 96000) .

Next year 1999, interest rate = 0.1,
Amount invested = 1296000,
Interest received = 1296000 * 0.1= 129600.

Total interest (appreciation) = interest in (1998 + 1999) = 96000 + 129600 = 225600 => Answer.
(1)
Annie said:   1 decade ago
I did not understand the last step i.e appreciation received on investment during the period of two years:

= Rs. (14.256 - 12) lakhs please explain.
Chip said:   1 decade ago
I got this wrong the first time around because I did not add the interest from the first year to the principal for the second year.
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