Determine the doubling time of the investment.
-4.72% APR compounded monthly
A) 22.07 years
B) 11.77 years
C) 14.71 years
D) 29.43 years

Question

Quizplus · Accepted Answer

The doubling time of an investment can be estimated using the Rule of 72, which states that dividing 72 by the annual interest rate gives an approximation of how many years it will take for the investment to double. However, for more accuracy, especially when interest is compounded more frequently than annually, the formula $T = \frac{\log(2)}{\log(1 + \frac{r}{n})} \times \frac{1}{n}$ can be used, where $T$ is the doubling time in years, $r$ is the annual interest rate (as a decimal), and $n$ is the number of compounding periods per year. For a 4.72% APR compounded monthly, $r = 0.0472$ and $n = 12$. Plugging these values into the formula gives a doubling time of approximately 14.71 years.

Determine the Doubling Time of the Investment