Doubling Time #1

Question

The doubling time of the balance for a money market certificate of deposit (CD) is 25 years. By what factor does it grow in 55 years?

(Round to the nearest tenth.)

Answer 1

 

Using rule of 70, rate of growth = 70/25 =2.8% pa compounded annually.

CD doubles in 25 years.=> CD will quadruple in 50 yrs.

 Compound value interest factor for 5 yrs = (1+(2.8%))⁵  = 1.028⁵ = 1.148

So the factor by which CD grows in 55 yrs = 4 *1.148 =4.592