1. Find how long will it take for money to triple at {0.05, m = 2} The rule of 72 provides a fast computation in finding the number of years required to double an amount at a given interest rate, just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at 6%, divide 72 by 6 and get 9 years. The rule of 72 is accurate, as long as the interest rate is less than 20%. If the unknown is the interest rate, run backward. Hence to double an amount in 8 years, just divide 72 by 9 to find that it will require an interest rate of about 8%.
1. Find how long will it take for money to triple at {0.05, m = 2} The rule of 72 provides a fast computation in finding the number of years required to double an amount at a given interest rate, just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at 6%, divide 72 by 6 and get 9 years. The rule of 72 is accurate, as long as the interest rate is less than 20%. If the unknown is the interest rate, run backward. Hence to double an amount in 8 years, just divide 72 by 9 to find that it will require an interest rate of about 8%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. Find how long will it take for money to triple at {0.05, m = 2}
The rule of 72 provides a fast computation in finding the number of years required to double an
amount at a given interest rate, just divide the interest rate into 72. For example, if you want to know how
long it will take to double your money at 6%, divide 72 by 6 and get 9 years. The rule of 72 is accurate, as
long as the interest rate is less than 20%. If the unknown is the interest rate, run backward. Hence to double
an amount in 8 years, just divide 72 by 9 to find that it will require an interest rate of about 8%.
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