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

Total = princ * (1+rate)^n
let's say when will $100 become $200
log(1 + rate) = {log(total) -log(Principal)} ÷ Years
log(1 + rate) = [log (200) - log(100)] / Years
log(1 + rate) = 2.3010299957 - 2 / 29
log(1 + rate) = .3010299957 / 29
log (1 + rate) = 0.0103803447
1 + rate = 10^0.0103803447
1 + rate = 1.0241895602
rate = .0241895602 or
rate = 2.41895602 %
Then the answer is C

Answer 3

I didn't use the rule of 72 and I used a method that gives an exact answer.

Answer 4

Okay to use the rule of 72:
time to double = 72 / rate
rate = 72 / time to double
rate = 72 / 29 = 2.4827586207
rate approximately equals 2.5%