This is a Fractions and Ratios word problem — looks intimidating with all the percentages flying around, but it cleans up fast once you set variables.
Let U = Urlanda's old budget, T = Toristan's old budget.
1. Old defense: Urlanda = 0.05U, Toristan = 0.01T. Combined = 0.05U + 0.01T.
2. New budgets: Urlanda = 1.2U, Toristan = 2T.
3. New defense (each country now spends 4%): Urlanda = 0.04 x 1.2U = 0.048U. Toristan = 0.04 x 2T = 0.08T. Combined new = 0.048U + 0.08T.
4. New combined is 20% more than old combined: 0.048U + 0.08T = 1.2 x (0.05U + 0.01T) = 0.06U + 0.012T.
5. Solve: 0.08T - 0.012T = 0.06U - 0.048U → 0.068T = 0.012U → U/T = 68/12 = 17/3.
6. Current ratio = 1.2U : 2T. Plug in U = (17/3)T: ratio = 1.2 x (17/3) : 2 = 6.8 : 2 = 17 : 5.
Answer: D (17:5).
The classic trap here is forgetting to apply the new budget multipliers at the end (step 6). A lot of people find U/T = 17/3 and then just pick E (17:3) thinking that's the current ratio. But the question asks for the ratio of their CURRENT budgets, which are 1.2U and 2T, not U and T. The 20% growth and doubling change the ratio.