Question

A sum is invested for 2 and half years at 16% per annum. If the interest is compounded after every 6 months, the time period is?

Answer 1

Answer:

Here it says the amount will rise to 16 times. That means with the capital (which we may assume as 1) it will become 16.

So without capital it will be then 15 times increase. Or you may say the net increase is 15 times.

Now arrange 15 logically in parts. How?

1+2+4+8=15.

So, it is apparanetly clear that each term is becoming the double of its previous term.

In percentage term it is increasing at 100%.

So, for a half yearly period the increament is at 100% rate.

Therefore, the annual rise will be at 200% rate.

So, for 3 years for 2700% or 27 times increase we may do it like this

100 →200% →200 total =300

300 → 200% →600 total = 900

900 →200% →1800 total =2700