Question

Double your wealth. Kant Miss Company is promising its investors that it will double their money every 3 years. What annual rate is Kant Miss promising? Is this investment a good deal? If you invest $350 now and Kant Miss is able to deliver on its promise, how long will it take your investment to reach $35,000? Using the Rule of 72, what annual rate is Kant Miss promising? || % (Round to the nearest whole percentage.)

Answer 1

Answer:

Rule 72:
Using Rule 72, Approximate Rate = 72 / 3 = 24%

Kant Miss is promising a annual rate of 24%.

Actual Rate = 2 ^(1/3) – 1 = 25.99%

Time Period required to deliver promise:
Amount deposited = $350
Amount required = $35,000
Rate = 25.99%
Time (n)= ??

Future Value = Present Value * (1 + r)^ n
$35,000 = $350 * (1 + 0.2599)^ n
$35,000 = $350 * 1.2599^ n
100 = 1.2599^ n
ln (100) = ln (1.2599)
n = 19.93

Therefore, it will take 19.93 years to reach investment at $35,000.