Risk Measures
An investor wants to double their $20,000 investment over the next 12 years. Using the Rule of 72, what approximate annual rate of return is needed?
Rule of 72: Rate = 72 / Years (to double). Quick mental math for time value questions.
Complete Analysis & Legal Rationale
Using the Rule of 72: Years to double = 72 / Interest Rate. To find the rate: 72 / 12 years = 6% annual return needed to double the investment.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
5% would take approximately 14.4 years to double (72/5 = 14.4).
Matches the verified teaching point in the explanation.
7% would double the investment in about 10.3 years.
8% would double the investment in about 9 years.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.