Question

Phil has $2,000 and he needs it to grow to $4,000 in 8 years. assuming he adds no more money to this fund, and uses the rule of 72, what rate of return would he need to earn?

Answer 1

Based on the rule of 72, Phil needs to earn 9% rate of return

What is rule of 72?

The rule of 72 states that the 72 divided by the rate of return on the fund should give the number of years the investment would be made, which is 8 years in this case, in other words, the formula for the rule of 72 is as given below:

years of investment=72/rate of return

years of investment=8

rate of return=unknown(assume it is r)

8=72/r

8*r=72

r=72/8

r=9(i.e. 9.00%)

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