When a stock has an average rate of return of 10% per year, then the value of the stock:
A) triples in 5 years.
B) doubles in 7 years.
C) doubles in 10 years.
D) triples in 10 years.

Question

Quizplus · Accepted Answer

Using the Rule of 72, which is a simplified way to estimate the number of years required to double the investment at a fixed annual rate of return, you divide 72 by the annual rate of return. For a 10% return, 72/10 = 7.2 years, so the stock approximately doubles in 7 years.

When a Stock Has an Average Rate of Return of 10