At a 5% annual compound interest rate, Rs. 8000 grows to Rs. 9261 over a certain period. Determine the time?
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Answer: D. 3 years
Explanation
The compound interest formula relates principal, annual interest rate, and time in years to the final amount. Substituting the given principal of eight thousand and final amount of nine two sixty one gives the growth factor. Evaluating the equation for the time variable t reveals that the investment period equals three years. Compound interest grows principal sums exponentially over time based on fixed annual percentage rates. Exponential equations can be solved for time exponents by matching base growth factors or using logarithms. Financial mathematics relies on compounding formulas to model investment growth over multi year durations.
Banking institutions apply compound interest calculations to determine loan amortization and savings growth schedules. Personal financial planning utilizes time value of money equations to forecast retirement account accumulations. Economic forecasting models project asset value appreciation over multi year investment horizons. Option A overestimates the required time period because investment growth achieves the target amount sooner. Option B suggests six years, which assumes a much lower annual compounding growth rate. Option C underestimates the duration because two years of compounding yields a smaller total amount.
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