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Aman invests Rs 40004000 in a bank at a certain rate of interest, compounded annually. If the ratio of the value of the investment after 33 years to the value of the investment after 55 years is 25:3625: 36, then the minimum number of years required for the value of the investment to exceed Rs 2000020000 is

Entered answer:

Solution

✅ Correct Answer: 9

Formula for Compound Interest:

A=P(1+r)nA = P(1 + r)^n

where:

A=A = final amount

P=P = principal amount (Rs 4000)

r=r = rate of interest (in decimals) per year (unknown)

n=n = number of years


Amount after 3 years:

A3=4000(1+r)3A_3 = 4000\left(1 + r\right)^3

Amount after 5 years:

A5=4000(1+r)5A_5 = 4000\left(1 + r\right)^5

Given ratio:

⇒A5A3=3625\Rightarrow \dfrac{A_5}{A_3} = \dfrac{36}{25}

⇒4000(1+r)54000(1+r)3=3625\Rightarrow \dfrac{4000\left(1 + r\right)^5}{4000\left(1 + r\right)^3} = \dfrac{36}{25}

⇒(1+r)5(1+r)3=3625\Rightarrow \dfrac{\left(1 + r\right)^5}{\left(1 + r\right)^3} = \dfrac{36}{25}

When dividing powers with the same base, we subtract the exponents.

⇒(1+r)5−3=3625\Rightarrow \left(1 + r\right)^{5-3} = \frac{36}{25}

⇒(1+r)2=(65)2\Rightarrow \left(1 + r\right)^2 = \left(\frac{6}{5}\right)^2

Taking the positive square root:

1+r=65r=1.2−1r=0.2\begin{aligned} 1 + r &= \frac{6}{5} \\ r &= 1.2 - 1 \\ r &= 0.2 \end{aligned}

Hence, r=20%r = 20\%


We need: 4000(1+20100)n>200004000\left(1 + \frac{20}{100}\right)^n > 20000

⇒4000(1.2)n>20000\Rightarrow 4000(1.2)^n > 20000

⇒(1.2)n>5\Rightarrow (1.2)^n > 5


In the on-screen calculator, keep multiplying 1.21.2 by itself, in the 9th time, you'll see it cross 55. Since we want the minimum number of years, we stop as soon as it crosses 5.

(1.2)8≈4.30(1.2)^8 \approx 4.30

(1.2)9≈5.16(1.2)^9 \approx 5.16

Hence, we need at least 9\boxed{9} years.


To check (for more clarity):

After 8 years: A=4000×(1.2)8=4000×4.30=Rs 17200A = 4000 \times (1.2)^8 = 4000 \times 4.30 = \text{Rs } 17200

After 9 years: A=4000×(1.2)9=4000×5.16=Rs 20640A = 4000 \times (1.2)^9 = 4000 \times 5.16 = \text{Rs } 20640

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