Question

ida is 25 years old and invests a one - time lump sum of $10,000 in her company’s 401(k), which earns an average annual return of 6% compounded annually. using the rule of 72, about how many years will it take for ida’s investment to double?
○ 2 years
○ 6 years
○ 10 years
○ 12 years

Explanation:

Step1: Recall Rule of 72 formula

The Rule of 72 states that the time to double an investment is approximately $\frac{72}{\text{annual interest rate (in \%)}}$.

Step2: Plug in the interest rate

Here, the annual interest rate is 6%. So we calculate $\frac{72}{6}$.

Step3: Perform the division

$\frac{72}{6} = 12$.

Answer:

12 years (corresponding to the option: 12 years)