Question

8.   Future Value. YOU invest a single lump sum of $5500 at the age of 21 years old and receive a 12% rate of annual return for 50 years or until the age of 72.
A)   How much will you have at the end of the 50-year period?

B ) How many times has your money doubled in the 50 years?

Answer 1

Future value = present value*(1+ rate)^time

Future value = 5500*(1+0.12)^50

Future value = 1589512.04

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself

number of doubles = number of years/(72/annual rate)

=50/(72/12) = 8.333 or 8 times