Question

Double your wealth. Kant Miss Company is promising its investors that it will double their money every 3

years. What annual rate is Kant Miss​ promising? Is this investment a good​ deal? If you invest ​$300

now and Kant Miss is able to deliver on its​ promise, how long will it take your investment to reach

​$34,000​?

Using the Rule of​ 72, what annual rate is Kant Miss​ promising?

24​% ​(Round to the nearest whole​ percentage.)

Using the time value of money​ equation, what annual rate is Kant Miss​ promising?

​(Round to two decimal​ places.)

Is this a good investment?

How long will it take to reach the goal of $34,000?

Answer 1

1.

Rule of 72 is an easy to calculate number of years to double your money at given interest rate.

Provided,

Kant Miss company double the money in every = 3 years

thus,

2.

Using time value money equation, Annual rate of Kant Miss promising -

where,

FV = Future value , suppose $2 here

P = Present value , Suppose $1 here

n = years i.e 3

r = interest rate

3.

Yes, This investment is good deal if your opportunity cost is less then 25.99% ( which means you are currently earning less 25.99%)

4.

FV (goal) = $34,000

Interest rate = 25.99%

P = $300

n = ?

taking log both side,

It takes 20.47 years to reach the goal.

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.