You have invested $2800 at an APR of 8%.

Question

Use the Rule of 72 to estimate how long it will be until your investment reaches $5600, and how long it will be until your investment reaches $11,200.

Answer 1

Hello, thank you for taking the time to post your question!

The Rule of 72 in this context means that you want to take 72/Annual Rate of Return to figure out how long it will take for your investment to double. Since the interest rate in this question is 8% that means that it will take

72/8 = 9 years for the amount to double

So the $2800 doubles to be worth $5600 after 9 years …. Then it doubles again to be worth $11,200 after another 9 years (18 years in total from today)

I hope that helps get you moving in the right direction! Feel free to reach out if you have any additional questions beyond that :)

Answer 2

Ivy, the formula is 

 

Years to double = 72/interest rate

 

We don't have to do anything fancy to the 8%. It just stays as 8.

 

Since 5600 is double 2800, we can use the formula.

 

So, we have Y = 12/8 = 3/2 = 1 1/2.

 

It will take 1 year and 6 months to get to $5600.

 

Since 11,2000 is double 5600, we use the same formula, which will give us the same answer. It will take another 1 1/2 years to get to $11,200, for a total of 3 years.

 

Hope this helps!