What amount would you need to deposit in an account

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Reference no: EM133326290

Case: The Rule of 72 provides a guideline for determining how long it takes your money to double. This rule can also be used to determine your earning rate. If your money is expected to double in 12 years, What is your rate of return?

If you desire to have $10,000 in savings eight years from now, what amount would you need to deposit in an account that earns 5 percent?
Self-Test Solutions

Using the Rule of 72, if your money is expected to double in 12 years, you are earning approximately 6 percent (72 - 12 years = 6
percent).

To calculate the present value of $10,000 for eight years at 5 percent, use L Exhibit 1-3C (or L Exhibit 1-C in the © Chapter 1 Appendix): $10,000 × 0.677 = $6,770

Reference no: EM133326290

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