Use the \"Rule of 72\" to determine the following (a) The number of years it tak

Question

Use the "Rule of 72" to determine the following (a) The number of years it takes to accumulate $15,000 in a savings account when P= $7,500 and i=6% per year (b) The number of years it takes to accumulate $30,000 in a savings account when P: $7,500 and 6% per year. (c) The average annual interest rate, i, required to double an initial investment, P, in 13 years. (a) The number of years it takes is 12 (Round to one decimal place.) (b) The number of years it takes is 24 (Round to one decimal place.) (c) The average annual interest rate is 5.54% (Round to two decimal places.)

Explanation / Answer

Find the average annual interest rate to double the investment in 13 years

2P = P (1+r%)^13

2^(1/13) = 1 + r%

1.0548 = 1 + r%

Hence r% = 5.48

This is the required rate.

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