If a sum of money is invested at a compound interest rate of 5% per annum, how l

₹0.0

Question: If a sum of money is invested at a compound interest rate of 5% per annum, how long will it take for the investment to double?

Options:

Correct Answer: 14.4 years

Solution:

Using the Rule of 72, Time = 72 / Rate = 72 / 5 = 14.4 years.

If a sum of money is invested at a compound interest rate of 5% per annum, how long will it take for the investment to double?

If a sum of money is invested at a compound interest rate of 5% per annum, how long will it take for the investment to double?

Step 1: Understand that we want to find out how long it takes for an investment to double.
Step 2: Know that the interest rate given is 5% per year.
Step 3: Use the Rule of 72, which is a simple formula to estimate the time it takes for an investment to double.
Step 4: The Rule of 72 states that you divide 72 by the interest rate.
Step 5: In this case, divide 72 by 5 (the interest rate).
Step 6: Calculate 72 / 5, which equals 14.4.
Step 7: Conclude that it will take approximately 14.4 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 used to estimate the number of years required to double an investment at a fixed annual rate of return.