Suppose the parents of a child born in the year 2000 had invested $5,000 at a 10% interest rate to be paid out to the child when she turns 21 years old.Approximately how many times will the investment double by the time it is paid out to the child?
A)2 times
B)3 times
C)4 times
D)8 times

Question

Quizplus · Accepted Answer

To solve this problem, we can use the rule of 72, which tells us how many years it takes for an investment to double in value.

The rule of 72 states that we can find the approximate number of years it takes for an investment to double by dividing 72 by the interest rate. In this case, the interest rate is 10%, so 72/10 = 7.2 years.

We can use this information to determine how many times the investment will double by the time it is paid out to the child.

When the child turns 21, the investment will have been growing for 21 years. We can divide 21 by 7.2 to find that the investment will have doubled approximately 2.9 times.

Since we can't have a partial doubling, we round down to 2, meaning the investment will double twice during that time period.

Therefore, the correct answer is B) 3 times.

Suppose the Parents of a Child Born in the Year