# Mr. Sayyad kept Rs. 40,000 in a bank at 8% compound interest for 2 years. Mr. Fernandes invested Rs. 1,20,000 in a mutual fund for 2 years. After 2 years, Mr. Fernandes got Rs. 1,92,000. Whose investment turned out to be more profitable?

Answer

Verified

381.6k+ views

Hint: Find the total amount of both Mr. Sayyad and Mr. Fernandes at the end of 2 years and then calculate the percentage increase from the initial sum for both.

Complete step-by-step answer:

According to the question, Mr. Sayyad kept Rs. 40,000 in a bank at 8% compound interest for 2 years. We know that the total amount for a sum of money compounded annually can be calculated using formula:

$ \Rightarrow A = P{\left( {1 + \dfrac{r}{{100}}} \right)^t}$, where P is the initial principal, r is the rate of compound interest and t is the time period in years.

For the given case, $P = 40000$, $r = 8\% $ and $t = 2{\text{ }}years$. Substituting these values, we get:

$

\Rightarrow A = 40000 \times {\left( {1 + \dfrac{8}{{100}}} \right)^2}, \\

\Rightarrow A = 40000 \times {\left( {1.08} \right)^2}, \\

\Rightarrow A = 46656 \\

$

The standing amount after 2 years is Rs. 46656. We can calculate compound interest:

$ \Rightarrow $Compound Interest $ = $Amount $ - $ Principal,

$ \Rightarrow $Compound Interest $ = $46656 $ - $ 40000 $ = $6656.

So, compound interest gained after two years is Rs. 6,656. Profit percentage is:

$

\Rightarrow {\text{Profit}}\left( \% \right) = \dfrac{{{\text{Profit}}}}{{{\text{Principal}}}} \times 100, \\

\Rightarrow {\text{Profit}}\left( \% \right) = \dfrac{{6656}}{{40000}} \times 100, \\

\Rightarrow {\text{Profit}}\left( \% \right) = 16.64\% \\

$

Hence, Mr. Sayyad enjoys 16.64% profit on his investment.

Further, Mr. Fernandes invested Rs. 1,20,000 in a mutual fund for 2 years and after this time period his principal amounts to Rs. 1,92,000. So his profit is:

$

\Rightarrow {\text{Profit}} = 192000 - 120000, \\

\Rightarrow {\text{Profit}} = 72000 \\

$

Mr. Fernandes’ profit percentage:

$

\Rightarrow {\text{Profit}}\left( \% \right) = \dfrac{{72000}}{{120000}} \times 100, \\

\Rightarrow {\text{Profit}}\left( \% \right) = 60\% \\

$

Hence, Mr. Fernandes enjoys 60% profit on his investment.

Clearly, Mr. Fernandes’ investment is more profitable.

Note: Profit percentage is always calculated over the initial sum. Further, in the case of compound interest, the amount standing at the end of a compounded period works as a principal for the subsequent compounding period.

Complete step-by-step answer:

According to the question, Mr. Sayyad kept Rs. 40,000 in a bank at 8% compound interest for 2 years. We know that the total amount for a sum of money compounded annually can be calculated using formula:

$ \Rightarrow A = P{\left( {1 + \dfrac{r}{{100}}} \right)^t}$, where P is the initial principal, r is the rate of compound interest and t is the time period in years.

For the given case, $P = 40000$, $r = 8\% $ and $t = 2{\text{ }}years$. Substituting these values, we get:

$

\Rightarrow A = 40000 \times {\left( {1 + \dfrac{8}{{100}}} \right)^2}, \\

\Rightarrow A = 40000 \times {\left( {1.08} \right)^2}, \\

\Rightarrow A = 46656 \\

$

The standing amount after 2 years is Rs. 46656. We can calculate compound interest:

$ \Rightarrow $Compound Interest $ = $Amount $ - $ Principal,

$ \Rightarrow $Compound Interest $ = $46656 $ - $ 40000 $ = $6656.

So, compound interest gained after two years is Rs. 6,656. Profit percentage is:

$

\Rightarrow {\text{Profit}}\left( \% \right) = \dfrac{{{\text{Profit}}}}{{{\text{Principal}}}} \times 100, \\

\Rightarrow {\text{Profit}}\left( \% \right) = \dfrac{{6656}}{{40000}} \times 100, \\

\Rightarrow {\text{Profit}}\left( \% \right) = 16.64\% \\

$

Hence, Mr. Sayyad enjoys 16.64% profit on his investment.

Further, Mr. Fernandes invested Rs. 1,20,000 in a mutual fund for 2 years and after this time period his principal amounts to Rs. 1,92,000. So his profit is:

$

\Rightarrow {\text{Profit}} = 192000 - 120000, \\

\Rightarrow {\text{Profit}} = 72000 \\

$

Mr. Fernandes’ profit percentage:

$

\Rightarrow {\text{Profit}}\left( \% \right) = \dfrac{{72000}}{{120000}} \times 100, \\

\Rightarrow {\text{Profit}}\left( \% \right) = 60\% \\

$

Hence, Mr. Fernandes enjoys 60% profit on his investment.

Clearly, Mr. Fernandes’ investment is more profitable.

Note: Profit percentage is always calculated over the initial sum. Further, in the case of compound interest, the amount standing at the end of a compounded period works as a principal for the subsequent compounding period.

Recently Updated Pages

Define absolute refractive index of a medium

Find out what do the algal bloom and redtides sign class 10 biology CBSE

Prove that the function fleft x right xn is continuous class 12 maths CBSE

Find the values of other five trigonometric functions class 10 maths CBSE

Find the values of other five trigonometric ratios class 10 maths CBSE

Find the values of other five trigonometric functions class 10 maths CBSE

Trending doubts

Difference Between Plant Cell and Animal Cell

Fill the blanks with the suitable prepositions 1 The class 9 english CBSE

Difference between Prokaryotic cell and Eukaryotic class 11 biology CBSE

What is the past tense of read class 10 english CBSE

Change the following sentences into negative and interrogative class 10 english CBSE

What is pollution? How many types of pollution? Define it

Give 10 examples for herbs , shrubs , climbers , creepers

Which state has the longest coastline in India A Tamil class 10 social science CBSE

Write an application to the principal requesting five class 10 english CBSE