A certain amount increases to five times its initial value after 10 years of compounding interest. How many years will it take for it to grow to twenty-five times its original amount?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. 20.
Let the growth factor in 10 years = 5
So, (1 + r)10 = 5
Now for 25 times:
(1 + r)t = 25
But 25 = 52
⇒ (1 + r)t = (1 + r)20
So, t = 20 years