QuestionMay 26, 2025

Approximately what interest rate is needed to double an investment over four years? Multiple Choice 4 percent 18 percent 25 percent 100 percent

Approximately what interest rate is needed to double an investment over four years? Multiple Choice 4 percent 18 percent 25 percent 100 percent
Approximately what interest rate is needed to double an investment over four years?
Multiple Choice
4 percent
18 percent
25 percent
100 percent

Solution
4.6(169 votes)

Answer

18 percent Explanation 1. Use the Rule of 72 The Rule of 72 is a shortcut to estimate the number of years required to double an investment at a fixed annual rate of interest. It states that you can divide 72 by the annual interest rate to get the approximate number of years needed to double the investment. 2. Calculate Interest Rate Rearrange the formula to find the interest rate: \text{Interest Rate} = \frac{72}{\text{Years}} . For doubling in 4 years, \text{Interest Rate} = \frac{72}{4} = 18\% .

Explanation

1. Use the Rule of 72<br /> The Rule of 72 is a shortcut to estimate the number of years required to double an investment at a fixed annual rate of interest. It states that you can divide 72 by the annual interest rate to get the approximate number of years needed to double the investment.<br /><br />2. Calculate Interest Rate<br /> Rearrange the formula to find the interest rate: $ \text{Interest Rate} = \frac{72}{\text{Years}} $. For doubling in 4 years, $ \text{Interest Rate} = \frac{72}{4} = 18\% $.
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