Question
Double your wealth. Kant Miss Company is promising its investors that it will double their money every
5 years. What annual rate is Kant Miss promising? Is this investment a good deal? If you invest
now and Kant Miss is able to deliver on its promise, how long will it take your investment to reach
?
Using the Rule of 72, what annual rate is Kant Miss promising?
(Round to the neares_ whole percentage.)
5 years. What annual rate is Kant Miss promising? Is this investment a good deal? If you invest
now and Kant Miss is able to deliver on its promise, how long will it take your investment to reach
Using the Rule of 72, what annual rate is Kant Miss promising?
Ask by Gibbs Grant. in the United States
Jan 22,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Kant Miss is promising an annual rate of 14%.
Solution
To determine the annual rate Kant Miss Company is promising using the Rule of 72, follow these steps:
Rule of 72 Overview
The Rule of 72 is a simple formula to estimate the number of years required to double an investment at a fixed annual rate of interest, or conversely, to estimate the annual rate needed to double an investment in a fixed number of years.
Given:
- Doubling Period: 5 years
Calculating the Annual Rate:
Using the Rule of 72:
Rounding:
- Nearest Whole Percentage: 14%
Answer:
14 %
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Beyond the Answer
Kant Miss Company claims it can double your money every 5 years. To find the annual rate, you can use the Rule of 72. Simply divide 72 by the number of years it takes to double (which is 5). So,
. Rounding to the nearest whole percentage, Kant Miss is promising an annual rate of approximately 14%.
Now, let’s calculate how long it will take for your initial investment of
to grow to
. Given the approximate 14% annual interest, use the formula for compound interest:
. Rearranging gives you
. Plugging in the numbers, you’ll find it takes about 25.5 years to reach your goal. So, buckle up for a long ride if Kant Miss delivers on its bold claim!