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Find the least number of complete years in which a sum of money put out at 25% compound interest will be more than double of itself?

Correct answer: D. 4 years

  • A. 6 years
  • B. 1 year
  • C. 2 years
  • D. 4 years

Explanation

At 25% compound interest, the amount after n years is P x 1.25ⁿ. After 3 years it is P x 1.25³ = 1.953125P, which is less than double, while after 4 years it is P x 1.25⁴ = 2.44140625P, which is more than double. Students may choose 2 years by treating compound growth as a simple 25% x 2 = 50% increase.

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