A certain sum becomes twice of itself in exactly five years at r% p.a simple interest . In which year does the sum amount to twice itself under r% p.a compounc interest ?? Please solve this step by step
Answers
Answered by
2
Simple interest is different than compound interest (which I believe the other quoran referred to in their answer) and it’s actually a much easier calculation.
You simply divide the annual interest payment into the principle and you’ll get the answer.
Compound interest refers to a sum that is reinvested - and the interest “compounds” on itself over each period. The formula for compound interest is:
P (1+r/n)^nt
p is principle
r is rate of interest
t is time (in years)
n is number of times interest is compounded
Simple interest only counts each amount that is accrued, and does not reinvest it.
So assuming an annual interest payment of 8% and a $100 investment - we just have to divide 100 by 8, which gives us an answer of 12.5 years
You simply divide the annual interest payment into the principle and you’ll get the answer.
Compound interest refers to a sum that is reinvested - and the interest “compounds” on itself over each period. The formula for compound interest is:
P (1+r/n)^nt
p is principle
r is rate of interest
t is time (in years)
n is number of times interest is compounded
Simple interest only counts each amount that is accrued, and does not reinvest it.
So assuming an annual interest payment of 8% and a $100 investment - we just have to divide 100 by 8, which gives us an answer of 12.5 years
Similar questions