Test Index

Time Value of Money

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Question : 58 of 99

Marks: +1, -0

A sum of money doubles itself at compounded interest in 10 years in how many years will it becomes eight times?

20
30
40
35

Solution:

Concept:

Compound interest growth:

A = P(1 + r)^t

.

Explanation:

Given: Money doubles in 10 years, so

2P = P(1 + r)^{10}

→

(1 + r)^{10} = 2

.

We need time

t

for it to become 8 times:

8P = P(1 + r)^t

→

(1 + r)^t = 8 = 2^3

.

Substitute

2 = (1 + r)^{10}

, so

(1 + r)^t = \left((1 + r)^{10}\right)^3 = (1 + r)^{30}

.

Thus

t = 30

years.

Answer:

30 years

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