What is the least value of n (n is number of years), the sum of money put out at 20% of CI (Compound Interest) will be more than double?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 4
Under compound interest at 20% a year, the amount is multiplied by 1.2 every year, since \(A=P\left(1+\frac{20}{100}\right)^{n}=P\times1.2^{n}\). The sum is more than double when \(1.2^{n}\gt2\).
After 1 year: \(1.2\)
After 2 years: \(1.2^{2}=1.44\)
After 3 years: \(1.2^{3}=1.728\), still less than 2
After 4 years: \(1.2^{4}=2.0736\), more than 2, so the least value is 4