In 1978, a kg of paper was sold at Rs25/-. If the paper rate increases at 1.5% more than the inflation rate which is 6.5% a year, then what will be the cost of a kg of paper after 2 years?
(a) 29.12 (b) 29.72 (c) 30.12 (d) 32.65 (e) none of these

• (a) 29.12
  
  Inflation rate = 6.5% ; Paper rate increases = 1.5%
  
  Rate of paper in 1st year (inflation rate) : 25 + (25 *6.5/100)
  = 25 + 25*0.065
  = 25 + 1.625
  = 26.625
  Rate of paper in 1st year is 1.5 % more.
  Therefore,
  Inflated cost in 1 yr = 26.625 + (26.625 *1.5/100)
  = 26.625 + 26.625*0.015
  = 26.625 + .399
  = 27.024
  
  Rate of paper in 2nd year (inflation rate) : 27.024 + (27.024 *6.5/100)
  = 27.024 + 27.024*0.065
  = 27.024 + 1.756
  = 28.780
  Rate of paper in 1st year is 1.5 % more.
  Therefore,
  Inflated cost in 1 yr = 28.780 + (28.780 *1.5/100)
  = 28.780 + 28.780*0.015
  = 29.12(approximately)
• 13 years agoHelpfull: Yes(43) No(14)
• inflation rate=6.5% and paper rate increase 1.5% more than inflation
  so,total increase in rate=6.5+1.5
  =8%
  duration=2 years
  cost of paper=25(1+8/100)(1+8/100)
  =29.16
• 12 years agoHelpfull: Yes(23) No(3)