Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

If you earn an annual interest rate of 6.9\% compounded annually, approximately how many years will it take to double your savings?

About 7.2 years

About 10.4 years

About 20.1 years

About 14.5 years

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Verified step by step guidance

Step 1: Understand the concept of compound interest and the Rule of 72. The Rule of 72 is a shortcut to estimate the number of years required to double an investment at a fixed annual interest rate. The formula is: \( \text{Years to double} = \frac{72}{\text{Annual Interest Rate}} \).

Step 2: Convert the annual interest rate from a percentage to a decimal for calculation purposes. For example, 6.9% becomes \( 0.069 \).

Step 3: Apply the Rule of 72 formula. Divide 72 by the annual interest rate in decimal form: \( \text{Years to double} = \frac{72}{0.069} \).

Step 4: Perform the division to calculate the approximate number of years it will take to double your savings. This step involves basic arithmetic.

Step 5: Compare the calculated result to the provided options (About 7.2 years, About 10.4 years, About 20.1 years, About 14.5 years) to determine the closest match.