Comparing Rates of Return

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For which type of investment, A or B, is the annual rate of return greater?

(1) Type A returns $120 per $1,000 invested for any one-year period and type B returns $96 per $2,400 invested for any one-year period.

(2) The annual rate of return for an investment of type B is 4 percent.

Review: Comparing Rates of Return




Explanation

The question is straightforward. On to the statements, which we examine separately first. In Statement (1), we confirm that the information truly gives an annual rate of return. It does; we are talking about a one-year period. And we get the information we need for both A and B. So Statement (1) is sufficient. No need to calculate the actual returns. Statement (2) does not offer any information about investment A, so it's insufficient.

The correct answer is (A).


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