Person 1 and Person 2 invest in three mutual funds A, B, and C. The amounts…
2024
Person 1 and Person 2 invest in three mutual funds A, B, and C. The amounts they invest in each of these mutual funds are given in the table.
Mutual fund AMutual fund BMutual fund CPerson 1₹10,000₹20,000₹20,000Person 2₹20,000₹15,000₹15,000At the end of one year, the total amount that Person 1 gets is ₹500 more than Person 2. The annual rate of return for the mutual funds B and C is 15% each. What is the annual rate of return for the mutual fund A?
- A.
7.5%
- B.
10%
- C.
15%
- D.
20%
Attempted by 4 students.
Show answer & explanation
Correct answer: B
Key idea: compute each person's total after one year in terms of the unknown rate for the first fund and solve the resulting equation.
Person 1's total = 10000(1 + r) + 20000(1 + 0.15) + 20000(1 + 0.15) = 10000(1 + r) + 46000.
Person 2's total = 20000(1 + r) + 15000(1 + 0.15) + 15000(1 + 0.15) = 20000(1 + r) + 34500.
Set the difference Person 1 − Person 2 = ₹500:
10000(1 + r) + 46000 − [20000(1 + r) + 34500] = 500
Simplify: −10000(1 + r) + 11500 = 500 ⇒ 1500 − 10000r = 500 ⇒ 10000r = 1000 ⇒ r = 0.10.
Answer: 10%.