Question

Mark:1
* Multiple Choice Questions (MCO)
1. If a principal becomes twice of its amount in 10 years, then the rate
of simple interest per annum is​

Answer 1

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It is called Rule of 72. Divide 72 by the interest rate, and it will give you the number of years it will take for your money to double…. 72/7.2=10…

So with a rate of 7.2% your money will double in 10 years.

Sorry, let me correct myself that the above answer is for COMPUNDED interest rate.

For a SIMPLE interest rate the answer is 10%.

So you double your money in 10 years with a 10% simple interest rate, and here is why, so let’s step through it quickly:

P = initial principle

i = simple interest percent

N = number off yesrs invested

F = Final investment after N years

So if you start with P amount of money and your interest rate is i% yearly, then after N years your money investment will be:

F = P + N*(i/100)*P

And if u want your money doubles (F=2P) in 10 years (N=10), then we have

2P = P + 10*(i/100)*P

You can divide both side by P in the above equation:

2 = 1 + 10*(i/100)

Which then i=10

So with a 10% yearly simple interest, your investment will double in 10 years.

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