Question

Robert meets with his investment advisor who reviews his portfolio and asks him how long it will take to double his $100,000 if he invests it in a bond that pays 6% interest annually.   Robert is completely impressed that his investment advisor responds quickly, stating that his money will double in _____________years.

9 years

10 years

11 years

12 years

Answer 1

Answer: 12 years is the answer.

Rule of 72- If you want to know the number of years in which your money will be doubled, You need to divide 72 by the interest rate. It is the simple rule of estimating the doubling of money, based on logarithmic formula.

Years to double = 72 / Interest rate

Years to double = 72 / 6

Years to double = 12 years.

Note: It is assumed that interest is annually compounded.

If you cross check it with Compound interest formula, you will get that $100000 will be $205000 in 12 years that is more than doubled.