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 (IBM Question)  
Asked by Saikat 









This means paper rate increase is 1.5+6.5 = 8% per year
For the first year the increase is 8 % or (8/100)x25 = 2
So the new cost is 25+2 = 27
For the second year the increase is the same = (8/100)x27 = 2.16
So the cost = 27+2.16 = 29.16.