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 ​$400 now and Kant Miss is able to deliver on its​ promise, how long will it take your investment to reach ​$26,000​? Using the Rule of​ 72, what annual rate is Kant Miss​ promising?

Answer 1

Answer:

Explanation:

Rule of 72, number of years taken to double the amount = 72/Rate of interest

Hence,

5=72/ Rate

Annual rate promised = 72/5 = 14.4%

It is a good deal if the opportunity cost is less than 14.4%

Let's assume it takes N number of years

400*(1+0.144)^N = 26,000

(1.144)^N = 65

N lies between 31 and 32 years