Question 9 Which of the following statements about calculating the number of yea
ID: 2642024 • Letter: Q
Question
Question 9
Which of the following statements about calculating the number of years needed to grow an investment to a specific amount of money is true?
The lower the interest rate, the shorter the time period needed to achieve the growth.
The higher the interest rate, the shorter the time period needed to achieve the growth.
The interest rate has nothing to do with the length of the time period needed to achieve the growth.
The Rule of 72 is the only way to calculate the time period needed to achieve the growth.
a.The lower the interest rate, the shorter the time period needed to achieve the growth.
b.The higher the interest rate, the shorter the time period needed to achieve the growth.
c.The interest rate has nothing to do with the length of the time period needed to achieve the growth.
d.The Rule of 72 is the only way to calculate the time period needed to achieve the growth.
Explanation / Answer
The higher the interest rate, the shorter the time period needed to achieve the growth.
Reason:FV= PV *(1+r)^n
Where, FV=Future Value , PV=Present Value , r=Interest Rate , n=number of years. This means , higher the interest rate lower will be the number of years for a specific FV amount.
b.The higher the interest rate, the shorter the time period needed to achieve the growth.
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