Question 42

A finance company declares that, at a certain compound interest rate, a sum of money deposited by anyone will become 8 times in three years. If the same amount is deposited at the same compound rate of interest, then in how many year will it become 16 times ?

Solution

Let the sum of money be P and the rate of interest be r.

By formula,

Amount(A) = (P) Principal * [1 - r/100]^n

A = 8P = P * [1+r/100]^3

On solving, we get r = 100

A = 16P = P * [1+100/100]^t

On solving, we get t = 4 years.

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