ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$657.97
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$640
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$157.97
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$140
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Detailed explanation-1: -What is the Rule of 72? The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.
Detailed explanation-2: -How Compound Interest Works. Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one.
Detailed explanation-3: -488.86. Hence, Compound interest would be Rs. 488.86.
Detailed explanation-4: -Solution: We use the present value formula, where A is $20, 000, r is 6% or 0.06, n is 12, and t is 5 years. Approximately $14, 827.45 should be invested today in order to accumulate to $20, 000 in five years.