# Compound Interest Calculation

In __________ years a sum will double at 5% per annum compound interest.

Options given are:

a. 15 years 3 months

b. 14 years 2 months

c. 14 years 3 months

d. 15 years 2 months

The way to solve is as below:

A = P [1+(r/100)]^n (^ - raised to the power of)

2P = P [1+(5/100)]^n

2 = [1+(5/100)]^n

log 2 = n * log(1.05) 0.3010 = n * 0.02118

Therefore n = 14.2069 years = 14 years and (0.2069 * 12) months = 14 years and 2.48 months.

Now the question is whether 2.48 months should be rounded to 2 months or 3 months?

Edit - The original question, asked and closed at MathEducators.SE contained the wording:

This is a academic question where I need to choose from the 4 options as given above. The book says answer is 14 years 2 months, but conceptually, before 2.48 months, the money does not double, so answer needs to be 14 years 3 months. Just asked this on forum to get to know if I am missing something.

This puts the nature of the question into better perspective.

• Convention is that 2.48 rounds down to 2. An awful problem. You solve, to the day, and then can get it wrong based on rounding? Commented May 20, 2015 at 11:20
• @JoeTaxpayer Unless during the course of the class the teacher made a big deal about proper rounding, in which case it would be a fair exam question. At least in the sense that it would test if you had learned what was taught. Still a dumb real-life question.
– Jay
Commented May 20, 2015 at 13:33
• @Jay - Understood. I imagine this to be on a standardized test, and my rule of rounding is wrong for the reason given in the answer below. If the teacher address how he wants this approached, I'm fine with either method. (I updated the question with a quote from OP's original question. It agrees with me, but I like and agree with base64's answer. Commented May 20, 2015 at 18:44
• Technically, none of the choices is correct. The question is fill in the blank, and none of the options given a sensible result. Fill in (c) and you get, "In 14 years 3 months years a sum will double at 5% per annum compound interest." That makes no sense. What's "3 months years"?
– Jay
Commented May 20, 2015 at 20:57
• As an educator I see this as a poorly designed set of answers. Every wrong answer must be the logical end to a incorrect path: bad decimal location, wrong type of log... Commented May 20, 2015 at 21:17