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Beatles will double in value from £35,000 to £70,000 in 9 years. If the “rule of...

Beatles will double in value from £35,000 to £70,000 in 9 years. If the “rule of 72” applies, what is the approximate implied annual interest rate if the dealer’s claim is true? What is the actual annual interest rate if the claim is true?

Solutions

Expert Solution

Approximate Implied Annual Interest rate = 72/ no. of years taken to double the value

=72/9

= 8%

Actual Interest rate comes to 9.02% as per below calculation.

Invested Amount Interest amount @ 9.02% Total (Principal + Interest)
1            100                 9            109
2            109               10            119
3            119               11            130
4            130               12            141
5            141               13            154
6            154               14            168
7            168               15            183
8            183               17            200

jeff jeffy answered 6 months ago
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