0 applies in any growth rate appli. s. The rule of 7 cation. Let\'s say you have

Question

0 applies in any growth rate appli. s. The rule of 7 cation. Let's say you have $1,000 in sa you have three alternatives: a savings account earning 1% interest . a U.S. Treasury bond earning 3% interest per year year a stock market mutual fund earning 8% interest per year Approximately how long would it take to dou- ble your savings in each of the three accounts? 6. Assume that you plan to retire in 40 years and are evaluating the three different accounts listed in question 5. How much would your $1,000 be worth in 40 years under each of the three alternatives?

Explanation / Answer

Solution:

A) A savings account earning 1% interest per year.

Solution: 70 years

Working: Time taken for money to get double =70/1

B) A U.S. Treasury bond mutual fund earning 3% interest per year. 23.3 years

Solution: 23.3 years

Working: Time taken for money to get double = 70/3 = 23.33

C) A stock market mutual fund earning 8% interest per year .

Solution: 8.75 years

Working: Time taken for money to get double = 70/8 = 8.75

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