CS Executive · Corporate Accounting and Financial Management · Time Value of Money
Ravi Textiles invests a sum in a deposit giving 12% per annum compounded annually. Using the Rule of 72, in how many years will the investment grow to four times its value?
The investment becomes four times in about 12 years. At 12% the Rule of 72 gives a doubling period of 6 years, and quadrupling needs two successive doublings, so 6 multiplied by 2 equals 12 years.
- A6 years
- B12 yearsCorrect
- C18 years
- D24 years
Explanation
Doubling period = 72 / 12 = 6 years. Four times requires two doublings: 2 x 6 = 12 years. Answering 6 years stops after only one doubling; 24 years wrongly applies 72/12 twice more.
Did you get it right without looking?
One question tells you little. A timed set on Time Value of Money shows your real accuracy, how long you take and where you lose marks.
More Time Value of Money questions
- Meera wants her deposit to double in exactly 6 years. Using the Rule of 72, what annual compound rate of interest must the deposit earn?
- In loan amortisation and capital recovery calculations, the capital recovery factor is the reciprocal of which of the following?
- Anita is promised ₹1,21,000 two years from now. If her required rate of return is 10% per annum compounded annually, what is the present val…
- A trust pays Rs 6,000 at the end of every year forever to a school. If the discount rate is 8% per annum, the present value of this perpetui…
- A scheme pays Rs 10,000 at the end of each year, forever, to a trust. The discount rate is 8% per annum. What is the present value of this p…
- Using the Rule of 72, approximately how many years will it take for a sum to double at 8% per annum compound interest?