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Homework Quiz

This article explains the Rule of 72, a simple formula to estimate how long it takes for an investment to double based on a fixed annual rate of return. For example, at an 8% interest rate, money will double in approximately 9 years. We also analyze Sally's savings for college, starting with $200 at 1% interest compounded annually. The calculations show her savings will grow to $202.04 in three years and to $328.93 after 50 years. If compounded monthly, it increases to $329.68, demonstrating the impact of compounding frequency on savings growth.

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Homework Quiz

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Presentation Transcript

  1. Homework Quiz

  2. Rule of 72 Interest Rate Years for money to double 9 years 6 12 36 2400 years • 8% • 12% • 6% • 2% • .03%

  3. I = P x R x T • Sally is saving money for college and she currently has $200 in her savings account. Her bank pays a rate of 1% on her money. If her money compounds annually, what will her account be worth in three years? • I= ??? • P= 200 • R= .01 • T= 1 year (three times)

  4. Solution • 200 x .01 x 1 = 2.00 • 202 x .01 x 1 = 2.02 • 204.02 x .01 x 1 = 2.04 • 206.06

  5. What would she have after 50 years? • 328.93

  6. What if her money compounded monthly? • For fifty years? • 329.68

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