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Compound interest growth time

CMAT 2020 · Quantitative Techniques & Data Interpretation · Easy · Simple & Compound Interest

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A company publishes to its customers that at a certain compound interest rate, a sum of money deposited by anyone will become 8 times in 3 years. If the same amount is deposited at the same compound rate of interest, then in how many years will it become 16 times ?

  1. A.

    4 years

  2. B.

    3.5 years

  3. C.

    3 years

  4. D.

    4.5 years

Answer

A

Explanation

If a sum becomes 88 times in 33 years, then (1+r)3=8⇒(1+r)=2(1+r)^3 = 8 \Rightarrow (1+r) = 2.

For the sum to become 1616 times in tt years: (1+r)t=16⇒2t=16=24⇒t=4(1+r)^t = 16 \Rightarrow 2^t = 16 = 2^4 \Rightarrow t = 4 years.

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