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% **
Initial Investment (Principal): $Rs. 80,000$
Final Value (Amount): $Rs. 1,00,000$
Time Period: 3 years
Calculate the Total Profit (Gain):
$\text{Gain} = \text{Final Value} - \text{Initial Investment}$
$\text{Gain} = 1,00,000 - 80,000 = 20,000$
Calculate the Rate of Return:
The formula for the absolute rate of return is:
$\text{Rate of Return} = \left( \frac{\text{Gain}}{\text{Initial Investment}} \right) \times 100$
$\text{Rate of Return} = \left( \frac{20,000}{80,000} \right) \times 100$
$\text{Rate of Return} = \frac{1}{4} \times 100 = 25\%$