Question

Lars deposited $50 into a savings account. According to the rule of 72, what interest rate will cause his money to double in approximately 29 years?

Answer 1

Explanation:

The answer is 2.5%

Answer 2

The rate that will double Lars deposit of $50 in 29 years will be calculated as follows:
Suppose the account used was using compound interest. Thus to determine his future value we shall use the formula:
FV=P(1+r)^n
where:
FV is future value
p=principle
r=rate
n=periods
from the information given
FV=$100
p=$50
n=29 years
we are required to find r
thus
100=50(1+r)^29
100/50=(1+r)^29
2=(1+r)^29
2^(1/29)=1+r
1.02419=1+r
hence:
r=0.02419~2.419%