You double your money in 5 years. The reason your return is not 20% per year is because ___.
A) it is probably a "fad" investment
B) it does not reflect the effect of discounting
C) it does not reflect the effect of the Rule of 72
D) it does not reflect the effect of compounding

Question

Quizplus · Accepted Answer

The reason for doubling your money in 5 years is due to compounding, where your returns from previous years are reinvested and added to your initial investment, allowing for exponential growth. A 20% annual return would not necessarily result in a doubling of money in 5 years due to the effect of compounding. The other options (A, B, C) are not relevant to the explanation of the return.

You Double Your Money in 5 Years