What Annual Rate of Return Must You Earn to Double

question 83

Multiple Choice

What annual rate of return must you earn to double your money in about 9 years? Use the Rule of 72 to determine your answer.

• A)You would need to earn an annual rate of return of about 12%.
• B)You would need to earn an annual rate of return of about 10%.
• C)You would need to earn an annual rate of return of about 8%.
• D)There is not enough information to answer this question.

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Definitions:

Present Value

The contemporary valuation of an anticipated sum of money or cash flow sequence, based on a given return rate.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the outstanding loan.