Financial Literacy: Compound Interest and the Rule of 72 Worksheet

Question 1

Maya deposits $200 in a savings account that earns 5% interest per year, compounded annually. How much money will she have after 1 year?

Accepted Answer

Maya will have $210.00 after 1 year because 5% of $200 is $10, and $200 plus $10 equals $210.

Question 2

Jalen invests $100 at 10% interest per year, compounded annually. Complete the amounts for the first 3 years: Year 0, Year 1, Year 2, and Year 3.

Accepted Answer

The amounts are Year 0: $100.00, Year 1: $110.00, Year 2: $121.00, and Year 3: $133.10. Each year, the amount is multiplied by 1.10.

Question 3

Use the Rule of 72 to estimate how many years it will take an investment to double if it earns 6% interest per year.

Accepted Answer

It will take about 12 years to double because 72 divided by 6 equals 12.

Question 4

Use the Rule of 72 to estimate how many years it will take money to double at 8% interest per year.

Accepted Answer

It will take about 9 years to double because 72 divided by 8 equals 9.

Question 5

A $500 investment doubles after about 12 years. Use the Rule of 72 to estimate the annual interest rate.

Accepted Answer

The annual interest rate is about 6% because 72 divided by 12 equals 6.

Question 6

Which investment doubles faster: Investment A earns 4% interest per year, or Investment B earns 9% interest per year? Use the Rule of 72 to explain.

Accepted Answer

Investment B doubles faster. Investment A takes about 18 years because 72 divided by 4 equals 18, while Investment B takes about 8 years because 72 divided by 9 equals 8.

Question 7

Lena puts $300 in an account earning 4% interest per year, compounded annually. What is the account balance after 2 years?

Accepted Answer

The account balance after 2 years is $324.48. After 1 year, $300 multiplied by 1.04 is $312.00, and after 2 years, $312.00 multiplied by 1.04 is $324.48.

Question 8

An account starts with $1,000 and earns 7% interest per year. Use the Rule of 72 to estimate the balance after about 10 years.

Accepted Answer

The balance will be about $2,000 after about 10 years because 72 divided by 7 is about 10.3, so the money nearly doubles in that time.

Question 9

The graph shows two accounts that both start at $100. Account X earns simple interest, and Account Y earns compound interest. Which account has the curved line, and why?

Accepted Answer

Account Y has the curved line because compound interest grows faster over time as interest is added to both the original money and earlier interest.

Question 10

A savings account earns 3% interest per year, compounded annually. If the starting balance is $400, what is the balance after 1 year and after 2 years?

Accepted Answer

After 1 year, the balance is $412.00 because $400 multiplied by 1.03 equals $412.00. After 2 years, the balance is $424.36 because $412.00 multiplied by 1.03 equals $424.36.

Question 11

Use the Rule of 72 to match each interest rate with its approximate doubling time: 2%, 6%, 12% and 36 years, 12 years, 6 years.

Accepted Answer

The matches are 2% with 36 years, 6% with 12 years, and 12% with 6 years. Each match is found by dividing 72 by the interest rate.

Question 12

Noah wants his $250 to grow to about $500 in 8 years. Use the Rule of 72 to estimate the interest rate he would need.

Accepted Answer

Noah would need an interest rate of about 9% per year because 72 divided by 8 equals 9.

Financial Literacy: Compound Interest and the Rule of 72

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