A certain sum is lent at a certain rate of compound interest. It grows to 1.44 times its value in 2 years. If the same sum is lent at simple interest at the same rate, in how many years would it…
Question and options
A certain sum is lent at a certain rate of compound interest. It grows to 1.44 times its value in 2 years. If the same sum is lent at simple interest at the same rate, in how many years would it double itself?
- 3 years
- 4 years
- 5 years
- 6 years
Answer and explanation
Correct answer: C - 5 years
(1 + r)^2 = 1.44 gives r = 20%. Under simple interest the sum doubles when 100% interest has built up: 100/20 = 5 years.
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