CMA Intermediate · Financial Management and Business Data Analytics · Time Value of Money
Using the Rule of 72, approximately how many years will it take for a sum invested at 9% p.a. compound interest to double?
The Rule of 72 estimates the doubling period by dividing 72 by the annual compound interest rate in percent. At 9% p.a., 72 divided by 9 gives 8 years, so the investment would roughly double in 8 years.
- A6 years
- B8 yearsCorrect
- C9 years
- D12 years
Explanation
Rule of 72: doubling period ≈ 72 ÷ interest rate = 72 ÷ 9 = 8 years. 6 years would come from wrongly dividing 54 by 9, and 12 years from using 108 as the numerator.
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