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Applying the Rule of 72 in reverse, what interest rate would double a balance in ten years?
A0.72 percent
B14.4 percent
C7.2 percent
D10.0 percent
Answer & Solution
Correct answer: C. 7.2 percent
1. The Rule of 72 links a rate and a doubling time through one division.
2. Running it forward divides 72 by the rate to get years.
3. Running it backward divides 72 by the years to get the rate.
4. Here that is 72 divided by 10.
5. The quotient is 7.2, read as 7.2 percent.
6. 0.72 percent misplaces the decimal point by one position.
7. 10.0 percent repeats the number of years instead of dividing into it.
8. 14.4 percent doubles the correct rate, which would halve the doubling time to five years.
_Source: FDIC Money Smart for Adults (September 2018), Module 5: Your Savings, section The Rule of 72_
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