ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$1, 396.56
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$900
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$2, 396.56
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$1900
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Detailed explanation-1: -You simply take 72 and divide it by the interest rate number. So, if the interest rate is 6%, you would divide 72 by 6 to get 12. This means that the investment will take about 12 years to double with a 6% fixed annual interest rate.
Detailed explanation-2: -For example, if the interest rate earned is 6%, it will take 12 years (72 divided by 6) for your money to double. If you want your money to double every 8 years, you will need to earn an interest rate of 9% (72 divided by 8).
Detailed explanation-3: -The formula is: Time = 72/r, where r is the rate of interest. The rule of 72 says that it will take about 12 years for an investment to double. The Rule of 72 applies to compounded interest rates and is reasonably accurate for interest rates between 6% and 10%.
Detailed explanation-4: -Summary: An investment of $10000 today invested at 6% for five years at simple interest will be $13, 000.