CS Executive · Corporate Accounting and Financial Management · Time Value of Money
Using the Rule of 72, approximately how many years will it take for a sum to double at 8% per annum compound interest?
It takes about 9 years. The Rule of 72 estimates doubling time by dividing 72 by the annual interest rate in percent, so 72 divided by 8 equals 9. This matches the exact compounding result of roughly 1.08 to the power 9, near 2.
- A6 years
- B8 years
- C9 yearsCorrect
- D12 years
Explanation
Rule of 72: doubling time is about 72 divided by the rate = 72/8 = 9 years. Check: (1.08)^9 is about 2.0. Six years would result from dividing by 12, not 8.
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…
- Meera invests Rs 10,000 at 12% per annum compounded half-yearly. What is the amount at the end of 1 year?
- Kiran deposits Rs 20,000 at the end of each year for 3 years in a scheme earning 10% p.a. compounded annually. What is the accumulated value…