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, will their hopes come true? Yes, the $15,000 will double each 7.5 years. In 15 years, it will double twice. Yes, the $15,000 will double in 7.5 years and be four times as much in 15 years. No, the $15,000 will only double once in 15 years, not double twice. No, it will take 30 years for the $15,000 to double twice.

Answer 1

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

Step-by-step explanation:

Answer 2

The correct option is yes,the $15,000 will double each 7.5 years.In 15 years ,it will double twice.

Step-by-step explanation:

The 72 rule stipulates that the number of years it would take an investment to achieve accumulate a certain amount- future value, can be computed by dividing 72 by the interest rate earns by the investment

N, the number of years=72/9.6

=7.5 years

Invariably,in 7.5 years' when Sally would have been 10.5 years(3 years now+7.5 years) the investment would have doubled.

By another 7.5 years when Sally would have been 18 years(10.5 years +7.5 years), the investment would have doubled twice.

The 72 rule is fast-track approach to calculating the duration of an investment.