Rule of 72 as a short cut method is explained by the formula:
Correct answer: A. 72 divided by the annual interest rate
- A. 72 divided by the annual interest rate
- B. Annual interest rate dividend by 72
- C. 72 divided by (annual interest rate multiplied by discount factor)
- D. None of these
Explanation
The Rule of 72 estimates the number of years needed to double an investment by dividing 72 by the annual interest rate expressed as a percentage. For example, at 8%, doubling takes about 72 ÷ 8 = 9 years.
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