BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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You would need to earn an annual rate of return of about 12%.
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You would need to earn an annual rate of return of about 10%.
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You would need to earn an annual rate of return of about 8%.
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There is not enough information to answer this question.
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Detailed explanation-1: -Financial experts have shown that, assuming an eight percent annual return, you can reasonably expect a retirement savings contribution to double every nine years.
Detailed explanation-2: -What Is the Rule of 72? The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.
Detailed explanation-3: -Do you know the Rule of 72? It’s an easy way to calculate just how long it’s going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
Detailed explanation-4: -Examples of the Rule of 72 This means, at a 10% fixed annual rate of return, your money doubles every 7 years. Let’s try another one: Given a 9% interest rate, how long will it take to double your money? Divide 72 by 9 and you’ll get 8 years.