Question

According to the Rule of 72, to find the amount of time required for a sum of money to double in value, you:

a) Divide the interest rate by 72
b) Multiply the interest rate by 72
c) Add 72 to the interest rate
d) Subtract 72 from the interest rate

Answer 1

a) Divide the interest rate by 72

According to the Rule of 72, to find the amount of time required for a sum of money to double, you divide the interest rate by 72 (a). The rule helps estimate the doubling time of an investment at a fixed interest rate.

Step-by-step explanation:

According to the Rule of 72, to find the amount of time required for a sum of money to double in value, you divide the interest rate by 72. Therefore, the correct answer is a) Divide the interest rate by 72. The Rule of 72 is an approximation used to estimate the number of years it will take for an investment or capital to double at a fixed annual rate of interest or growth.

For example, if you want to calculate the number of years to double your money at an annual rate of 5%, you would perform the following calculation using the Rule of 72:

• 72 divided by 5 equals 14.4.

So it would take approximately 14.4 years for the investment to double at a 5% annual interest rate.