A person has an initial investment of Rs. 50,000 in an investment plan. After 2 years, it has grown to Rs. 60,000, then his rate of return is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 20%
Note: The given answer is as per the official NTA Answer Key. However, the question does not say whether the rate of return is for the whole 2 years or per year, and with the per-year reading Option (1) could also be a possible answer, as explained below.
The rate of return compares the gain with the amount invested:
\( \displaystyle \text{Rate of return}=\frac{\text{Final value}-\text{Initial value}}{\text{Initial value}}\times 100 \)
\( \displaystyle =\frac{60000-50000}{50000}\times 100 \)
\( \displaystyle =20\% \) for the whole 2 years
Per year: \( 20\%\div 2=10\% \)
Option (1) 10% — Should also be correct, though not the answer given by NTA. The investment grew by 20% over 2 years. If the question means the rate for each year, the 20% is spread over the 2 years: \( 20\%\div 2=10\% \) per year.
Option (2) 15% — Incorrect. The rate is 20% for the whole 2 years or 10% per year; 15% is neither.
Option (3) 20% — Correct. The money grew from Rs. 50,000 to Rs. 60,000, a gain of Rs. 10,000, which is 20% of Rs. 50,000. This is the return over the whole 2 years.
Option (4) 25% — Incorrect. The rate is 20% for the whole 2 years or 10% per year; 25% is neither.