Little Beau Peep lost her sheep. She couldn’t remember how many were there. She knew she would have 400 more next year, than the number of sheep she had last year. How many sheep were there? I. The number of sheep last year was 20% more than the year before that and this simple rate of increase continues to be the same for the next 10 years. II. The increase is compounded annually.
Explanation:
The statement I suggests that the number of sheep had increased by 20% last year over the previous year. But it does not suggest whether the rate of increase is annual or not. For eg. 20% increase in a year can also be obtained by 9.5% increase ever 6 months. i.e. 1.095 x 1.095 = 1.20. The statement II however suggests that the increase is compounded annually. Hence, now we can find the answer. If the number of sheep last year was x, then x + 400 = x(1.2)2 Hence, x = 909. Thus we require both statements to answer the question.
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