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 desire your savings to double in 6 years, what annual rate of return (compounded annually) would you need to earn?

Exactly 10.0\%

Approximately 8.3\%

Approximately 6.0\%

Approximately 12.2\%

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Verified step by step guidance

Step 1: Understand the concept of the Rule of 72, which is a simplified formula to estimate the number of years required to double an investment at a fixed annual rate of return. The formula is: \( \text{Rate of Return} = \frac{72}{\text{Time to Double}} \).

Step 2: Identify the given information in the problem. The time to double the savings is 6 years, and the goal is to find the annual rate of return.

Step 3: Apply the Rule of 72 formula. Substitute the time to double (6 years) into the formula: \( \text{Rate of Return} = \frac{72}{6} \).

Step 4: Simplify the equation to calculate the approximate rate of return. This will give you the annual rate of return needed to double the savings in 6 years.

Step 5: Compare the calculated rate of return with the provided options (10.0\%, 8.3\%, 6.0\%, and 12.2\%) to determine the correct answer.