Mr. Vishnu has an initial investment of Rs.80,000 in an investment plan. After 3 years, it has grown to Rs.1,00,000, then his rate of return is
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 25%
The rate of return is the gain as a percentage of the initial investment:
\(\text{Gain} = 1{,}00{,}000 - 80{,}000 = 20{,}000\)
\( \displaystyle \text{Rate of return} = \frac{\text{Gain}}{\text{Initial investment}} \times 100 \)
\( \displaystyle = \frac{20000}{80000} \times 100 = 25\% \)
This is the return over the whole 3 years, which is what the question asks. A yearly rate would be smaller (about 8.3% simple or 7.7% compound) and is not among the options.