@soccerman
Desiree put $175 into a CD that pays 6% interest compounded semiannually. According to the rule of 72, approximately how long will it take for her money to double?

A. 8 years
B. 12 years
C. 18 years
D. 16 years

Question

@soccerman
 		Desiree put $175 into a CD that pays 6% interest compounded semiannually. According to the rule of 72, approximately how long will it take for her money to double?

A.	8 years
 		B.	12 years
 		C.	18 years
 		D.	16 years

anonymous · Answer

@lasttccasey

lasttccasey · Answer

You must use A=P(1+r/n)^(nt), where A = total accrued amount, P is principle, r is the rate, n is the number of compounds annually, and t is time in years.
Using this you find t = 11.724 Years so the closest answer is 12 Years.

jack1 · Answer

@lasttccasey whats the rule of 72?

lasttccasey · Answer

That's basically telling you the rate needs to be divided by the compounded amount which is semiannually so its 2 in this case. Also that's the letter 'n' in the formula above. According to Wiki: http://en.wikipedia.org/wiki/Rule_of_72

jack1 · Answer

think i get it better
number of periods = 72/interest rate per period
                               = 72/3
                                = 24

so 24 periods semiannually = 12 years?

lasttccasey · Answer

Actually the true formula is ln(2)/ln(1+r) = T in years. I'm not very familiar with this stuff but doing that formula you get 11.90 years basically. I'm studying mechanical engineering so this is a little outside my area of practice lol

jack1 · Answer

ahha, cool, cheers for the help tho man, gonna read up on it now

lasttccasey · Answer

Nice, well good luck and you're welcome.