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If a sum of money is invested at a compound interest rate of 12% per annum, how
If a sum of money is invested at a compound interest rate of 12% per annum, how long will it take for the investment to double?
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If a sum of money is invested at a compound interest rate of 12% per annum, how long will it take for the investment to double?
5 years
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Using the rule of 72, we estimate the time to double as 72/12 = 6 years.
Questions & Step-by-step Solutions
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Q
Q: If a sum of money is invested at a compound interest rate of 12% per annum, how long will it take for the investment to double?
Solution:
Using the rule of 72, we estimate the time to double as 72/12 = 6 years.
Steps: 6
Show Steps
Step 1: Understand that compound interest means the money earns interest on both the initial amount and the interest that has already been added.
Step 2: Know that the rule of 72 is a quick way to estimate how long it will take for an investment to double at a certain interest rate.
Step 3: Identify the interest rate given in the question, which is 12%.
Step 4: Use the rule of 72 formula: Divide 72 by the interest rate (72 / 12).
Step 5: Calculate the result: 72 divided by 12 equals 6.
Step 6: Conclude that it will take approximately 6 years for the investment to double.
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