Question

    The rule of 72 can be used to give an estimate of the

    time period in which an investment amount can grow by ______, given the annual rate of return. 
    A 25% Correct Answer Incorrect Answer
    B 50% Correct Answer Incorrect Answer
    C 72% Correct Answer Incorrect Answer
    D 100% Correct Answer Incorrect Answer
    E 200% Correct Answer Incorrect Answer

    Solution

    The rule of 72 is a simple way to determine how long an investment will take to double (i.e. grow by 100%), given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself. However, the Rule of 72 is reasonably accurate for low rates of return.

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