You double your money in 5 years. The reason your return is not 20 percent 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 the money in 5 years is the effect of compounding. This means that the return on the investment is reinvested, and the interest is earned on both the original amount and the previously earned interest, leading to exponential growth. It is not due to a "fad" investment or the effect of discounting or the Rule of 72. Therefore, option D is the correct answer.

You Double Your Money in 5 Years