A sum of money on compound interest triples itself in 20 years. After 40 years, it will become:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 9 times
Under compound interest, money is multiplied by the same factor in every equal period, because each period's interest is added to the principal and earns interest in turn.
In the first 20 years the sum becomes 3 times
In the next 20 years that amount is tripled again: \(3\times3=9\)
So after 40 years the sum becomes 9 times the original
Tip: Compound growth multiplies, it does not add. Doubling the time from 20 to 40 years squares the factor (\(3^2=9\)); it does not double it to 6.