Question

Approximately how long will it take you to double your savings of $500 if you open a CD that earns 4% interest, according to the rule of 72?

Answer 1

Answer:  18 years

Explanation:

According to the rule of 72, we divide the number 72 over the interest rate treated as a whole number, rather than a percentage. So it will take about 72/4 = 18 years for the money to double.

Answer 2

Answer:

≈ 18 years

Step-by-step explanation:

Given the principal amount of $500 used to invest in a CD, possibly earning an interest of 4%:

Rule of 72, Defined:

The rule of 72 states that the time, t,  it takes to double one's money is given by  $\mathsf{t\:\approx\: \frac{72} {r\%}}$.  

In other words, the rule implies that you could easily find the approximate number of years that it will take to double your money by simply dividing 72 by the given interest rate (in percentage), 4%.

Solution:

Substitute the interest rate into the rule of 72 to find the time it takes to double one's savings:

$\mathsf{t\:\approx\: \frac{72} {4\%}}$

$\mathsf{Rule\:of\:72\:=\:\frac{72} {4\%} \approx 18 years}$

Therefore, it will take approximately 18 years to double your savings of $500.