If $1000 is invested at 8% interest compounded annually, then it will double in about 9 years:
1. In 9 years, a value of $1000 invested at 8%
= 1000×(1.08)⁹ =$ 1999.005 ≈ $2000
which is almost double =$1000
Hence the rule of 72 (72/8 =9) is verified.
2. In 6 years, a value of $1000 invested at 12.1
= 1000× 1.12⁶
= $1973.8
which is 1.97 (≈ 2) times $1000
Hence the rule of 72 (72/12= 6) is verified.
In finance and economics, interest is a payment from a borrower or deposit-taking financial group to a lender or depositor of an amount above compensation of the principal sum, at a specific price. it's miles distinct from a price that the borrower may additionally pay the lender or a few third birthday parties.
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