Question

Lars deposited $50 into a savings account for which interest is compounded quarterly. According to the rule of 72, what interest rate will cause his money to double in approximately 29 years?

Answer 1

A. 0.6%
B. 1.7%
C. 2.5%
D. 0.4%

Answer 2

What is the rule of 72?

Answer 3

To calculate interest, I use the formula
\[A = P \times (1+\frac{ t }{ n })^{rt}\]
Where A is the desired amount, P is the principle, t is time in years, n is the number of compoundings per year, and r is the interest rate.

Using that formula, I calculate an interest rate of 1.14% to double the money.
If the rule of 72 is an approximation, then maybe answer B (1.7%) is correct.