Mathematics of FinanceMCQMTP June 24 Series IIIQuestion 1418 of 512
All Questions

In how many years will a sum of money double at 5%\displaystyle 5\% p.a compounded interest?

Options

A15 years 3 months
B14 years 2 months
C14 years 3 months
D15 years 3 months
For any discrepancies in this question, email contact@cadada.in

Correct Answer

Option b14 years 2 months

All Options:

  • A15 years 3 months
  • B14 years 2 months
  • C14 years 3 months
  • D15 years 3 months

Ad

Detailed Solution & Explanation

Let the principal be P\displaystyle P and the compound interest rate be i=0.05\displaystyle i = 0.05 (5% p.a.). Under compound interest, the amount A\displaystyle A after t\displaystyle t years is: A=P(1+i)tA = P(1+i)^t We want to find the time t\displaystyle t for the sum of money to double itself (A=2P\displaystyle A = 2P): 2P=P(1.05)t    (1.05)t=22P = P(1.05)^t \implies (1.05)^t = 2 Taking natural logarithms on both sides: tln(1.05)=ln(2)t \ln(1.05) = \ln(2) t0.6931470.04879014.207 yearst \approx \frac{0.693147}{0.048790} \approx 14.207 \text{ years} To convert the fractional part of years into months: Months=0.207×122.48 months2 months\text{Months} = 0.207 \times 12 \approx 2.48 \text{ months} \approx 2 \text{ months} Thus, it takes approximately 14\displaystyle 14 years and 2\displaystyle 2 months for the sum of money to double. Hence, **Option B** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

Related Comparison Tables

More Questions from Mathematics of Finance

Ready to Master Mathematics of Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free