Return on Investment?

Question

After an increase of 60% in the first year of an investment, what rate of return in the second year will double the original investment?

Answer 1

The answer is 25%

The previous answer forgot that you also get a return on your gains.

Suppose you start with $100. After one year, you have $160. You need another $40 to get to $200 (double your original value). $40 is 25% of $160.

Answer 2

x: original investment
at the end of one year, you have : 1.6x

y: percentage that doubles it

So, equation is:

1.6x * y = 2x
y = 20/16 = 5/4 = 1.25

So ROI in second should be 25%