The Rule of 72: This is a continuation o Financial advisors sometimes use a rule of thumb known as the Rule of 72 to get a rough estimate of the time it takes for an investment to double in value. For...

The Rule of 72: This is a continuation o Financial advisors sometimes use a rule of thumb known as the Rule of 72 to get a rough estimate of the time it takes for an investment to double in value. For an investment that is compounded yearly at an interest rate of r%, this rule says it will take about 72/r years for the investment to double. In this calculation, r is the integer interest rate rather than a decimal. Thus, if the interest rate is 8%, we would use 72 8 rather than 72 0.08 . For the remainder of this exercise, we will consider an investment that is compounded yearly at an interest rate of 13%.

a. According to the Rule of 72, how long will it take the investment to double in value? Parts b and c of this exercise will check to see how accurate this estimate is for this particular case.

b. Using the answer you got from part a of this exercise, calculate the future value interest factor Is it exactly the same as your answer to the first question in part ?

c. If your initial investment was $5000, use your answer from part b to calculate the future value. Did your investment exactly double?