Final answer:
To determine how long it takes to double or quadruple money at a 6.1 percent interest rate, the Rule of 72 is used: 72 divided by the interest rate equals approximately 11.8 years to double, and multiplying that time by 2 gives approximately 23.6 years to quadruple.
Step-by-step explanation:
To determine how long it takes for money to double or quadruple at a certain interest rate, we use the Rule of 72, which is a simplified formula to estimate the number of years required to double the invested money at a given annual rate of compound interest. To find the doubling time, you divide 72 by the interest rate. Similary, to find the quadrupling time, you first determine the doubling time and then multiply by 2 because if the money doubles once, then doubles again, it has quadrupled.
Doubling the Investment
To calculate how long it will take to double the money at 6.1 percent interest, you would perform the following calculation:
- Divide 72 by the interest rate: 72 / 6.1 = approximately 11.8 years.
Quadrupling the Investment
To calculate how long it will take to quadruple the money at the same interest rate:
- Take the doubling time and multiply by 2: 11.8 years × 2 = approximately 23.6 years.
Therefore, at 6.1 percent annual compound interest, money will double in about 11.8 years and quadruple in about 23.6 years.