MACROECONOMICS QUESTION

Question

Rita puts $10000 into two different assets. The first pays $10, and the second hand

pays 5%. According to the rule of 70, what is the approximate difference in the value

of the two assets after 14 years?

a. $12000

b. $14000

c. $17000

d. $20000

CORRECT ANSWER IS D, SHOW PROCESS PLEASE

Answer 1

Let's break it down.

Asset A attracts 10%

Asset B attracts 5%

Rule 70 formula

70/annual growth rate

A =70/10

=7

B=70/5

=13.8 or 14

After 14 years difference on value =

14/7=2

2*10,000=

20,000