Question

You deposited in an account 3000$, how much does interest rate has to be for this money to quadruplicate in 6 years, if (a) we are talking about simple interest, and (b) if it's compound interest. Draw diagram.

Answer 1

a) Considering Simple Interest

Deposited amount = $3000

Net Amount = 4*3000 = $12000

SI = (P*R*T)100, Where, P = $3000, T = 6 years

Therefore, 12000 = 3000 + (3000*6*R)/100

=> 9000 = 180R

=> R = 9000/180 = 50%

b) Considering Compound Interest

Net Amount = $12000

Principal amount = $3000, Terms = 6 Years

Assuming, it is compounded annually, n = 1

Therefore, from the compound interest formula,

A = P(1 + R/n)^nT , Where, A = Final amount, P is initial amount, T is terms and n is 1 for annually compunded

=> 12000 = 3000(1 + R/1)^1*6

=> 4 = (1 + R)⁶

Therefore, R = 26%