Mathematics of FinanceMCQMTP Jun 23 Series IIQuestion 3941 of 512
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A certain sum of money amounts to double in 5\displaystyle 5 years placed at compound interest. In how many years will it amount to 16\displaystyle 16 times at same rate of interest?

Options

A12\displaystyle 12 years
B20\displaystyle 20 years
C24\displaystyle 24 years
DNone of these
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Correct Answer

Option b20\displaystyle 20 years

All Options:

  • A12\displaystyle 12 years
  • B20\displaystyle 20 years
  • C24\displaystyle 24 years
  • DNone of these

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Detailed Solution & Explanation

Let the principal amount be P\displaystyle P and the rate of interest per annum be i\displaystyle i. Under compound interest, the amount A\displaystyle A after t\displaystyle t years is given by: A=P(1+i)tA = P(1+i)^t Given that the sum of money doubles itself in 5\displaystyle 5 years: 2P=P(1+i)5    (1+i)5=22P = P(1+i)^5 \implies (1+i)^5 = 2 We want to find the number of years t\displaystyle t in which the sum will become 16\displaystyle 16 times of itself: 16P=P(1+i)t    (1+i)t=1616P = P(1+i)^t \implies (1+i)^t = 16 We can express 16\displaystyle 16 as a power of 2\displaystyle 2: 16=2416 = 2^4 Substituting (1+i)5=2\displaystyle (1+i)^5 = 2 into the equation: (1+i)t=((1+i)5)4(1+i)^t = \left((1+i)^5\right)^4 (1+i)t=(1+i)20(1+i)^t = (1+i)^{20} Comparing the exponents: t=20 yearst = 20 \text{ years} Therefore, the sum will become 16\displaystyle 16 times of itself in 20\displaystyle 20 years. 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

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