ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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8 years
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7.2 year
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7 years
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9 years
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Detailed explanation-1: -For example, with a 9% rate of return, the simple calculation returns a time to double of eight years. If you use the logarithmic formula, the answer is 8.04 years-a negligible difference. In contrast, if you have a 2% rate of return, your Rule of 72 calculation returns a time to double of 36 years.
Detailed explanation-2: -For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
Detailed explanation-3: -It’s called the Rule of 72. The principle is simple. Divide 72 by the annual rate of return to figure how long it will take to double your money. For example, if you earn an 8 percent annual return, it will take about 9 years to double.
Detailed explanation-4: -t=ln20.09≈7.70 2 0.09 ≈ 7.70 years.
Detailed explanation-5: -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.