ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The number of years to double the money
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The number of years to earn the money
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Either A or B
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None of the above
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Detailed explanation-1: -What Is the Rule of 72? The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.
Detailed explanation-2: -It’s an easy way to calculate just how long it’s going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
Detailed explanation-3: -The Rule of 72 is an easy way to estimate how long before an investment doubles. Simply divide the interest rate by 72 to determine the number of years it will take to double.
Detailed explanation-4: -The formula to use the Rule of 72 is as follows: The Rule of 72: Number of years to double the investment = 72/ annual rate of interest.
Detailed explanation-5: -Roughly translated: In wanting to know of any capital, at a given yearly percentage, in how many years it will double adding the interest to the capital, keep as a rule [the number] 72 in mind, which you will always divide by the interest, and what results, in that many years it will be doubled.