Question

In: Finance

How many years will it take $15,000.00 to turn into $60,000.00 at a rate of 3.6% per year (annual compounding)?

How many years will it take $15,000.00 to turn into $60,000.00 at a rate of 3.6% per year (annual compounding)? Use the rule of 72 to approximate, then confirm that you are close using the appropriate algebraic or Excel finance function.

Solutions

Expert Solution

Rule of 72 says the number of years it takes for an investment to double is 72 divided by interest rate

The investment in this scenario here has quadrupled

Number of years as per Rule of 72 = 72 / 3.60 * 2 = 40 years

In order to calculate accurately we can use Nper function where Rate = 3.6% PV = 15000 and FV = 60000

=NPER(0.036,0,-15000,60000,0)

= 39.20 years


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