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6 March, 21:42

Double your wealth. Kant Miss Company is promising its investors that it will double their money every 5 years. What annual rate is Kant Miss promising? Is this investment a good deal? If you invest $400 now and Kant Miss is able to deliver on its promise, how long will it take your investment to reach $26,000 ? Using the Rule of 72, what annual rate is Kant Miss promising?

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  1. 6 March, 22:00
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    Rule of 72, number of years taken to double the amount = 72/Rate of interest

    Hence,

    5=72 / Rate

    Annual rate promised = 72/5 = 14.4%

    It is a good deal if the opportunity cost is less than 14.4%

    Let's assume it takes N number of years

    400 * (1+0.144) ^N = 26,000

    (1.144) ^N = 65

    N lies between 31 and 32 years
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