On February 1, 1990, Adam deposited $5000 into a savings account paying 8.47% interest, compounded quarterly. If he hasn't made any additional deposits or withdrawals since then, and if the interest rate has stayed the same, in what year did his balance hit $10,000, according to the rule of 72? A.1996 B.1998 C.2000 D.1994

QUESTION POSTED AT 18/04/2020 - 07:36 PM

Answered by admin AT 18/04/2020 - 07:36 PM

The rule of 72 will have you divide 72 over the interest rate in percent form. Ignore the percent symbol

So we'll divide 72 over 8.47 to get...

72/8.47 = 8.50059

which is roughly 8.5 years for the money to double

If we round to the nearest whole number, then it takes 9 years for the money to double (according to the rule of 72). The year 1999 isn't listed so the next best choice is the year 2000. So I'm fairly confident the answer is C) 2000. Though your teacher may have 1998 in mind for some reason. If it were me, I'd go with 2000 because the year 1998 will have the account balance short of the goal of $10,000.

Answer: Choice C) 2000
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