Question

Becky tells her friend about the Rule of 72 and her friend immediately

tries it out with her own example. Becky doesn't see all of her friend's
math but does see f(4) = 18 written on her friend's paper.

a. What do you know about the friend's investment based on this?

b. Is the friend's math correct based on the rule of 72?

Answer 1

a. the investment earns 4%

b. yes

Explanation:

The "rule of 72" says that an investment earning compound interest at x% will double in value after 72/x years. That is, ...

f(x) = 72/x

__

a.

We interpret f(4) to mean Becky's friend is interested in the doubling time for an investment that earns 4% interest.

__

b.

Using the above formula, ...

f(4) = 72/4 = 18

The friend's math is correct.