If water is mixed with milk to gain 20% by selling the mixture at cost price. Then ratio of water to milk in mixture, is:

1 : 5

The correct answer is Option (3) → 1 : 5 **

Let cost price of milk per litre = 1 (water is free).

Let milk = 1 litre, water = x litres.

Total cost = 1

Total volume = 1 + x

Cost price of mixture per litre = $\frac{1}{1+x}$

Selling price per litre = cost price of milk = $1$

Given gain = $20\% = 0.2$

$\frac{1 - \frac{1}{1+x}}{\frac{1}{1+x}} = 0.2$

$x = 0.2$

Ratio of water : milk = $0.2 : 1 = \frac{1}{5}$

The required ratio is $1 : 5$.