CMA Intermediate · Financial Management and Business Data Analytics · Time Value of Money
Kavita invests ₹1,00,000 in a scheme earning 12% p.a. compounded annually. Using the Rule of 72, in about how many years will the investment grow to ₹4,00,000?
At 12% p.a., the Rule of 72 gives a doubling period of 6 years. Reaching ₹4,00,000 from ₹1,00,000 needs two doublings, so the time required is about 12 years.
- A6 years
- B8 years
- C12 yearsCorrect
- D18 years
Explanation
Doubling period = 72 ÷ 12 = 6 years. Growing from ₹1,00,000 to ₹4,00,000 needs two doublings (1L to 2L to 4L), so 2 × 6 = 12 years. Choosing 6 years counts only one doubling.
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