Author Question: Assume you put 2,000 into a tax-free investment and leave it there for 45 years at an annual rate of ... (Read 75 times)

mrsjacobs44 · **on:** Jul 10, 2018

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 · **Reply #1 on:** Jul 10, 2018

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