Multiple choice

A sum becomes 8 times its original amount in 3 years, compounded annually at a certain rate. Find the rate of interest.

  1. 50%

  2. 100%

  3. 75%

  4. 125%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A = P(1+r)^n. 8P = P(1+r)^3. 8 = (1+r)^3. 2 = 1+r. r = 1 = 100%.

AI explanation

Using the compound interest formula, the amount equals the principal multiplied by the quantity 1 plus the rate divided by 100, all raised to the power of the time. Setting the amount to 8 times the principal, the equation becomes 8 equals the quantity 1 plus the rate divided by 100, cubed. Taking the cube root gives 2 equals 1 plus the rate divided by 100, which means the rate divided by 100 equals 1, resulting in a rate of 100 percent.

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