Assume you put 2,000 into a tax-free investment and leave it ...

[mrsjacobs44]

Assume you put 2,000 into a tax-free investment and leave it there for 45 years at an annual rate of 8. According to the Rule of 72, your investment will grow to a value of about 64,000.
 
  Indicate whether the statement is true or false.

Question 2

A firm has prepared the coming year's pro forma balance sheet resulting in a plug figure in a preliminary statementcalled the external financing requiredof negative 250,000. The firm may prepare to ________.
 
  A) sell common stock totaling 250,000
  B) arrange for a loan of 250,000
  C) do nothing; the balance sheet balances
  D) invest in marketable securities totaling 250,000

[Sarahjh]

Answer to Question 1

Answer: TRUE
Explanation: According to the Rule of 72, an investment earning 8 a year will double in value approximately every 9 years. Thus, the 2,000 will grow to about 64,000 in 45 years. In 45 years, the original investment will double five times (2K  2 = 4K, 4K  2 = 8K, 8K  2 = 16K, 16K  2 = 32K, and 32K  2 = 64K).

Answer to Question 2

D

[mrsjacobs44]

Thanks for the timely response, appreciate it

[amcvicar]

Excellent