The price of petrol increases by 6% every year. If the current price is ₹ 110 per litre, then what will be the price of one litre of petrol after 2 years?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹ 123.60
The 6% rise each year is worked out on the price at the start of that year, so the price is multiplied by 1.06 once for every year, as in compound interest.
After 1 year: \(110\times1.06=116.60\)
After 2 years: \(116.60\times1.06=123.596\), that is, about ₹ 123.60
Shortcut: Two successive rises of 6% make a total rise of \(6+6+\frac{6\times6}{100}=12.36\%\), and 12.36% of 110 is 13.596, so the price is \(110+13.596\approx123.60\).