Data Interpretation - Line Charts - Discussion
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.
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.
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.
Please explain this!