I. Solve the following using The Rule of 72. 1. You expect to earn 8% per year o
ID: 2699874 • Letter: I
Question
I. Solve the following using The Rule of 72.
1. You expect to earn 8% per year on your investment. If you invest $3000 today, how much will your investment be worth in 9 years ?
2. You want to have $40,000 available to finance a trip around the world in 12 years. You estimate that you can earn 12% on your investment. How much do you need to deposit today to meet your goal ?
3. A new Grady White fishing boat cost $5000 in 1979. Today, the very same boat costs around $40,000. Estimate the average annual inflation rate, using the Rule of 72.
4. You invest $2000 today and expect ot earn 9% per year. how many years will it take for your investment to grow to $32,000 ?
Explanation / Answer
1) 3000*1.08^ 9 = $5997
2)P*1.12^11 + P*1.12^10 +.....P = 40,000 ;
P = $ 1657.5
3)5000*(1+r)^34 = 40,000
r = 6.3 %
4)2000*1.09^t = 32000
t = 32.17 years