Question

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, StartFraction 72 Over r EndFraction , 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.

Answer 1

Alan will win. Using the rule of 72:

- Ted: 72 / 4.5 = 16 years to double.
- Alan: 72 / 6 = 12 years to double.

Alan's 12 years is shorter, so he wins.