Rule of 72 answer key PDF

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“Rule of 72” Math Answer Key Total Points Earned Total Points Possible Date Percentage Class Directions: Use the “Rule of 72” to answer the following questions.

1. Bryce invested $30,000 in his employee‐sponsored retirement account when he was 23 years old. He is now 65 years old and ready to retire. If he earned an average of 4% on the account, how many times did it double? What is the value at age 65?  

It doubles about 2.33 times The value is around $69,900 (multiple the 2.33 by $30,000)

2. How long will it take the following investments to double? Round answers to two decimal places.

Investment Money Market Mutual Fund

Interest Rate 3.1%

Small Company Stock 3 year Certificate of Deposit 5 year Certificate of Deposit Large Company Stock Government Bond Treasury Bills Money Market Account Savings Account

12.6% 2.8% 5.1% 11.3% 5.3% 3.8% 2.6% 2.3%

Years to Double 23 5.71 25.71 14.12 6.37 13.58 18.95 27.69 31.3

3. Jenny has a $3,000 balance on her credit card with an 18% interest rate. If she makes no payments on her card and no late fees were charged how long will it take her debt to double? (1 point)

© Take Charge Today – March 2014 – Rule of 72 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona

4 years

4. What if Jenny’s APR was 22% and she makes no payments on her card and no late fees were charged?

3.27 years

Tanner is a high school freshman and has purchased a $500 Certificate of Deposit for college. What interest rate must Tanner earn for his investment to double in 4 years? Could Tanner realistically expect to earn that interest rate on a CD? 18%

5. Kari would like to make a down payment on a house. She currently has $7000. What interest rate must Kari receive for her investment to double in 7 years? 10.29%

6. Jackie’s parents invested $3000 into a common stock earning 6% when she was born. How many times will Jackie’s investment double before age 36? What will her investment be worth? What would Jackie’s investment be worth if her parent’s had waited to invest until she was age 7?   

3 times it will double

$9,000 her investment will be worth If her parents wait until she is 7, then her investment will be worth $7,260 (29 years/12= 2.42)

7. Approximately how many times will a $50,000 investment, earning 5.5% interest, double from age 25 to age 62? What will the investment be worth?  2.83 times which will be worth $141,500

© Take Charge Today – March 2014 – Rule of 72 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona...