This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Answer the following questions. Be sure to show all your work not just the answer. Follow this format: cite the formula, and then plug in numbers, then compute to show your final answer. Q1 through 10 are worth 4 points each; Q11a, Q11b, Q12, and Q13 are worth 15 points each. Be sure to solve according to the method that is requested. 1. What is the Rule of 72? The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself. 2. Solve using the Rule of 72: rate = 8%, years = 18, pv = $7,000. Solve for fv. 72 8% = 9 Years to Double Investment $7,000 * 2 (at 9 years) * 2 (at 18 Years) = $28,000 FV = $28,000 3. Solve, using the Rule of 72 rate = 4%, years = 18, fv=$8,000. Solve for pv. 72 4% = 18 Years to Double Investment $8,000 2 (at 18 Years) = $4,000 PV = $4,000 4. Solve, using the Rule of 72: rate =6%, pv=$7,000, fv= $56,000. Solve for years. 72 6% = 12 Years to Double Investment $56,000 2 (at 12 Years) 2 (at 24 years) 2 (at 36 years) = $7,000 Years = 36 5. Solve, using the Rule of 72: pv=$10,000; fv=$160,000; years=10. Solve for rate....
View
Full
Document
 Spring '12
 MIKEWOODARD
 Accounting

Click to edit the document details