Question 55

Aman invests Rs 4000 in a bank at a certain rate of interest, compounded annually. If the ratio of the value of the investment after 3 years to the value of the investment after 5 years is 25 : 36, then the minimum number of years required for the value of the investment to exceed Rs 20000 is


Correct Answer: 9

Solution

Let us assume the amount invested to be $$P$$, and the rate of interest to be $$r$$. 
Value of the investment after 3 years will be, $$P\left(1+r\right)^3$$
Value of the investment after 5 years will be, $$P\left(1+r\right)^5$$

$$\left(1+r\right)^2=\frac{36}{25}$$
$$\left(1+r\right)^2=1.44$$
$$r=0.2$$

We need to find the value of n for which $$4000\left(1+r\right)^n>20000$$
$$\left(1+r\right)^n>5$$
$$\left(1.2\right)^n>5$$
We see that, 
$$1.2^8=4.2999$$
$$1.2^9=5.15$$

Hence it takes 9 years to grow to over 20,000. 

Video Solution

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