In your first year out of college you hope to earn $30,000 per year.How many years will you have to work until you earn $120,000 if your income increases at a rate of 10% per year? Use the Rule of 72 to determine your answer.
A)You would need to work for just over 14 years to reach an income level of $100,000 per year.
B)You would need to work for just over 10 years to reach an income level of $100,000 per year.
C)You would need to work for just over 7 years to reach an income level of $100,000 per year.
D)You would need to work for just over 5 years to reach an income level of $100,000 per year.

Question

Quizplus · Accepted Answer

The Rule of 72 states that to determine the number of years it will take for an investment to double at a given annual rate of return, divide 72 by the annual rate of return. In this case, the annual rate of return is 10%, so it will take 72 / 10 = 7.2 years for the income to double to $60,000. It will then take another 7.2 years for the income to double again to $120,000. Therefore, it will take a total of 7.2 + 7.2 = 14.4 years to reach an income level of $120,000.

In Your First Year Out of College You Hope to Earn