Ted and Alan are in a race to double their money. Ted feels he will win if he puts his $4,000 into a savings account offering 4.5% interest compounded annually. Alan feels he will win because he intends to put his $1,000 into a savings account offering 6% interest compounded annually. Using the rule of 72, who will win, and how many years will it take to double his money? Alan will win. It will take 16 years. Alan will win. It will take 12 years. Ted will win. It will take 12 years. Ted will win. It will take 16 years.

Question

Mathematics

Fisher Bridges

15 January, 04:03

Ted and Alan are in a race to double their money. Ted feels he will win if he puts his $4,000 into a savings account offering 4.5% interest compounded annually. Alan feels he will win because he intends to put his $1,000 into a savings account offering 6% interest compounded annually. Using the rule of 72, who will win, and how many years will it take to double his money? Alan will win. It will take 16 years. Alan will win. It will take 12 years. Ted will win. It will take 12 years. Ted will win. It will take 16 years.

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Lowery · Answer 1

Ted:

4,000 @ 4.5% interest compounded annually

Alan:

1,000 @ 6% interest compounded annually

Rule of 72: divide 72 by the compound annual interest rate

Ted: 72/4.5% = 16 years

Alan: 72/6% = 12 years

Alan will win. It will take 12 years.