A simple method of determining how fast savings grow is to use the "Rule of 72." Divide the number 72 by the interest rate to get the number of years required for money to double. For example, in the case of a 16% interest rate, 72 divided by 16% equals 4.5, so it takes four and a half years for money to double. This is based upon the 16% rate being compounded annually. If the interest is compounded quarterly or daily, slightly fewer years will he required. - - How is the ’Rule of 72' affected when interest is compounded daily?
Choose one answer.
a. The number of years involved decreases
b. The return on your investment doubles
c. The calculations become more precise
d. The rate of interest is much higher