Exploring Compound Interest and the Rule of 72

The video explains compound interest, highlighting its significance in growing investments over time. It contrasts simple and compound interest using examples of two investors, Kevin and Cindy. The Rule of 72 is introduced as a quick way to estimate investment doubling time. The video emphasizes the exponential growth potential of compound interest and warns about the impact of management fees on investment returns. It encourages viewers to consider long-term investment strategies and be mindful of fees.

What does compound interest allow your investments to do?

• Decrease over time

• Stay the same

• Grow by themselves

• Require constant monitoring

What is the primary benefit of compound interest?

• Increases inflation rate

• Requires active management

• Decreases investment value

• Allows money to grow while you rest

What is the main difference in the investment approach between Kevin and Cindy?

• Cindy reinvests her interest

• Cindy invests more money initially

• Kevin has a higher interest rate

• Kevin uses compound interest

What effect does withdrawing interest annually have on an investment's growth?

• Increases growth

• Reduces potential growth

• Doubles the interest

• No effect

According to the Rule of 72, how many years will it take to double an investment at a 4% interest rate?

• 12 years

• 18 years

• 36 years

• 24 years

How long does it take for an investment to double at a 10% interest rate according to the Rule of 72?

• 72 years

• 10 years

• 7.2 years

• 36 years

How much would a $5 coffee be worth in 30 years if invested at a 10% interest rate?

• $80

• $160

• $200

• $400

What would be the future value of spending $10 on lunch instead of investing it, after 30 years at a 10% rate?

• $300

• $200

• $100

• $160

What is the impact of a 2% management fee on Cindy's investment after 30 years?

• Reduces to 56% of the original value

• Increases by 56%

• No impact

• Doubles the investment

How does a higher management fee affect the final amount of an investment?

• Has no effect

• Decreases the final amount

• Increases the final amount

• Changes the investment risk