In a conversation with a friend, you note that you have two real estate investments, one that has doubled in value in the past 9 years and another that has doubled in value in the past 12 years. Your friend says that the first investment has been growing at approximately 8 % compounded annually and the second at 6 % compounded annually. How did your friend make these estimates? The rule of 72 states that the annual compound rate of growth r of an investment that doubles in n years can be approximated by r = 72 / n . Construct a table comparing the exact rate of growth and the approximate rate provided by the rule of 72 for doubling times of n = 6 , 7 , … , 12 years. Round both rates to one decimal place.
In a conversation with a friend, you note that you have two real estate investments, one that has doubled in value in the past 9 years and another that has doubled in value in the past 12 years. Your friend says that the first investment has been growing at approximately 8 % compounded annually and the second at 6 % compounded annually. How did your friend make these estimates? The rule of 72 states that the annual compound rate of growth r of an investment that doubles in n years can be approximated by r = 72 / n . Construct a table comparing the exact rate of growth and the approximate rate provided by the rule of 72 for doubling times of n = 6 , 7 , … , 12 years. Round both rates to one decimal place.
Solution Summary: The author compares the exact rate of growth and the rate calculated using the rule of 72, for doubling times of n=6,7,mathrm...,12.
In a conversation with a friend, you note that you have two real estate investments, one that has doubled in value in the past
9
years and another that has doubled in value in the past
12
years. Your friend says that the first investment has been growing at approximately
8
%
compounded annually and the second at
6
%
compounded annually. How did your friend make these estimates? The rule of
72
states that the annual compound rate of growth r of an investment that doubles in n years can be approximated by
r
=
72
/
n
. Construct a table comparing the exact rate of growth and the approximate rate provided by the rule of
72
for doubling times of
n
=
6
,
7
,
…
,
12
years. Round both rates to one decimal place.
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