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Rule of 72 Assignment Question #1--Please select the correct answer.The average stock market return since 1926 has been 11%. According to the Rule of 72, how often will an individual's investment double? a6.5 years b654 years c.15 years d6 years

Question

Rule of 72 Assignment Question #1--Please select the correct answer.The average stock market return since 1926 has been 11%. According to the Rule of 72, how often will an individual's investment double? a6.5 years b654 years c.15 years d6 years

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Solution

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. You divide 72 by the annual rate of return you receive on your investments.

So, for this question, you would divide 72 by 11 (the average stock market return since 1926).

72 ÷ 11 = 6.54

So, an individual's investment will double approximately every 6.5 years. Therefore, the correct answer is a) 6.5 years.

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