A sum of money is invested at a compound interest rate of 12% per annum. How lon

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Question: 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?

Options:

Correct Answer: 6 years

Solution:

Using the rule of 72, 72/12 = 6 years to double the investment.

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?

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?

Step 1: Understand that compound interest means the money grows on itself over time.
Step 2: Know that the rule of 72 is a quick way to estimate how long it will take for an investment to double.
Step 3: The rule of 72 states that you divide 72 by the interest rate (in percentage) to find the number of years to double your investment.
Step 4: In this case, the interest rate is 12%.
Step 5: Calculate 72 divided by 12, which equals 6.
Step 6: Therefore, it will take approximately 6 years for the investment to double.

Compound Interest – Understanding how compound interest works and how it affects the growth of an investment over time.
Rule of 72 – A simplified formula to estimate the number of years required to double an investment at a fixed annual rate of return.