A sum of money invested at compound interest amounts to twice itself in 4 years. In how many years will it become 8 times itself?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. 12 years.
Amount after compounding = P(1 + R/100)n
⇒ 2P = P(1 + R/100)4
⇒ (1 + R/100)4 = 2
To become 8 times: 8P = P(1 + R/100)n
⇒ (1 + R/100)n = 8 = 23
⇒ (1 + R/100)n = [(1 + R/100)4]3 = (1 + R/100)12
⇒ n = 12 years