An investor needs to double his money in seven years to reach his financial goals. What is the lowest rate of return he must earn to do this successfully? (Hint: Rule of 72)

Answer 1

The Rule of 72 states that to estimate the number of years it takes to double an investment at a given annual rate of return, we divide 72 by the rate of return. In this case, the investor needs to double his money in seven years, so we can use the Rule of 72 to find the lowest rate of return he must earn.

72 / rate of return = 7

To solve for the rate of return, we rearrange the equation:

rate of return = 72 / 7

rate of return ≈ 10.286%

Therefore, the investor must earn at least a 10.286% rate of return to double his money in seven years.