A sum of money doubles itself in 10 years at compound interest. What is the rate

A sum of money doubles itself in 10 years at compound interest. What is the rate of interest?

A sum of money doubles itself in 10 years at compound interest. What is the rate of interest?

Correct Answer: 7.2%

Step 1: Understand that the problem is about compound interest, where money grows over time.
Step 2: Know that the money doubles in 10 years.
Step 3: Use the Rule of 72, which is a quick way to estimate the interest rate needed to double your money.
Step 4: The Rule of 72 states that you divide 72 by the number of years it takes to double your money.
Step 5: In this case, divide 72 by 10 (the number of years).
Step 6: Calculate 72 / 10 = 7.2.
Step 7: Conclude that the rate of interest is approximately 7.2%.

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 the investment at a fixed annual rate of return.