Shubham invests ₹5000 in a bank at a certain rate of interest, compounded annually. The ratio of the investment's value after 2 years to its value after 4 years is $25 : 49$. What is the minimum number of years for the value to exceed ₹25000?
Answer and solution
Correct answer: 5
Solution
Growth over 2 years $= \dfrac{49}{25}$, so annual growth factor $= \dfrac{7}{5}$, i.e. $40\%$ a year.
Year 1: ₹7000 · Year 2: ₹9800 · Year 3: ₹13720 · Year 4: ₹19208 · Year 5: ₹26891.20
It first exceeds ₹25000 after $5$ years.
Year 1: ₹7000 · Year 2: ₹9800 · Year 3: ₹13720 · Year 4: ₹19208 · Year 5: ₹26891.20
It first exceeds ₹25000 after $5$ years.