Question

Sally's parents deposited $15,000 into a college savings account on her third birthday. The account had an interest rate of 9.6% compounded annually. They were hoping that the money would double twice by the time she was 18 years old. Using the rule of 72, t = StartFraction 72 Over r EndFraction will their hopes come true?

Answer 1

a. Yes, the $15,000 will double each 7.5 years. In 15 years, it will double twice.

Answer 2

their hopes will come true

Explanation:

Using the formula for calculating amount expressed as;

A = P(1+r)^t

Given

P = $15000

r = 9.6% = 0.096

t = 15years (18-3)

Substitute;

A = 15,000(1+0.096)^15

A = 15,000(1.096)^15

A = 15000(3.9551)

A = 59,326.6

As we can see, the money is even more than twice the original amount, this shows that their hopes will come true