Question

How long will it take to double an investment at 5.3% compounded annually? Round your answer to the nearest tenth of a year.

A. 7.3 years
B. 13.2 years
C. 10.6 years
D. 12.6 years

Answer 1

Using the Rule of 72, we divide 72 by the annual interest rate of 5.3% to estimate the number of years to double the investment. The result is approximately 13.6 years, which we round to the nearest tenth to select the closest option, 13.2 years.

Step-by-step explanation:

To determine how long it will take to double an investment at a 5.3% interest rate compounded annually, we can use the Rule of 72. This financial rule estimates the number of years required to double an investment by dividing 72 by the annual rate of return. In this case, we divide 72 by 5.3, which gives us approximately 13.6 years. However, since this is not one of the provided options and we must round to the nearest tenth, the closest option is rounded down to 13.2 years (Option B).

Step-by-Step Explanation:

1. Apply the Rule of 72 by dividing 72 by the annual interest rate: 72 / 5.3 = 13.58.
2. Round the result to the nearest tenth: 13.6 years (which is not an available option).
3. Choose the closest rounded option: 13.2 years (Option B).