Question

Daniel puts $9,000 into each of two different assets. The first asset pays 20 percent interest and the second pays 10 percent. According to the rule of 70, what is the approximate difference in the value of the two assets after 7 years?

Group of answer choices

$18,000

$4,500

$15,300

$10,800

Answer 1

Option (a) is correct

As per rule of 72, time required to double the investment is calculated by the following formula:

Time needed to double the investment = 70 / Interest rate

So,

So, investment of given $9000 will be double or it will be $18000 in the below time period:

First asset:

Time period = 70 / 20 = 3.5 years

In 3.5 years, investment will be $9000 * 2 = $18000

So, in 7 years or next 3.5 years  (i.e. 7 - 3.5), investment will be $18000 * 2 = $36000

Second asset:

Time period = 70 / 10 = 7 years

So, in 7 years, investment will be $9000 * 2 = $18000

Difference in investment after 7 years = $36000 - $18000 = $18000