Question

A sum of money is invested in compound interest at the rate of 5% per annum. In how many years will the money be doubled?​

Answer 1

Answer:

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:(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.