Question

Sally’s parents deposited $15,000 into a college savings account on her third birthday. The account had an interest rate of 9.6% compounded annually. They were hoping that the money would double twice by the time she was 18 years old. Using the rule of 72, t = StartFraction 72 Over r EndFraction will their hopes come true?

Yes, the $15,000 will double each 7.5 years. In 15 years, it will double twice.
Yes, the $15,000 will double in 7.5 years and be four times as much in 15 years.
No, the $15,000 will only double once in 15 years, not double twice.
No, it will take 30 years for the $15,000 to double twice.

Answer 1

Yes. Using the rule of 72: t = 72/9.6 = 7.5 years to double. In 15 years that's two doubling periods (15/7.5 = 2), so the $15,000 will double twice (about four times as much).