Skip to content

CMA Foundation · Fundamentals of Business Mathematics and Statistics · Time Value of Money and Annuity - Simple and Compound Interest

In how many years will a sum of money double itself at 10% per annum compound interest if the amount after 7 years is 1.95 times the sum and after 8 years is 2.14 times the sum, and interest is counted only on full years? Choose the smallest whole number of years in which the sum is at least doubled.

The sum doubles in 8 years. After 7 years the amount is only 1.95 times the principal, which is below double, while after 8 years it is 2.14 times, which exceeds double. So 8 is the smallest whole number of years.

  1. A7 years
  2. B8 yearsCorrect
  3. C9 years
  4. D10 years

Explanation

After 7 years the amount is 1.95 times the sum, which is less than 2 times, so it has not doubled. After 8 years it is 2.14 times, which is at least 2. Hence 8 years is the smallest whole number of years. Seven years fails because 1.95 is below 2.

Did you get it right without looking?

One question tells you little. A timed set on Time Value of Money and Annuity - Simple and Compound Interest shows your real accuracy, how long you take and where you lose marks.

Practise Time Value of Money and Annuity - Simple and Compound InterestFree diagnostic mock

More Time Value of Money and Annuity - Simple and Compound Interest questions