Question

Cody has invested $12,000 total. He has invested $3,000 in stocks, $2,000 in a certificate of deposit, and $5,000 in government bonds. Cody's stocks are currently performing poorly. He has purchased $2,000 worth of an automotive company’s stock, and its value has steadily dropped over the last year. He is reluctant to sell the stock because he is worried about how much money he has already invested.

If cody sold all his stocks and put the total amount in an account with 5% interest, in how many years would his money double?

Answer 1

Using the Rule of 72, which states you divide 72 by the interest rate, it would take approximately 14.4 years for Cody's money to double with a 5% interest rate.

Step-by-step explanation:

To find out how many years it would take for Cody's money to double if he sold all his stocks and placed the total amount in an account with 5% interest, we use the Rule of 72. This is a simple way to determine the time required for money to double at a given interest rate. You divide 72 by the interest rate to find the number of years it will take to double the investment.

In Cody's case, he wants to invest at a 5% interest rate. Therefore, we divide 72 by 5 to get the answer. 72 / 5 = 14.4, meaning it will take approximately 14.4 years for Cody's money to double.

It's important to note that this is a rule of thumb, and actual results may vary depending on how the interest is compounded. However, for annual compounding, the Rule of 72 gives a very good approximation.