Well we have already seen the power of compounding. Next is what "Rule of 72"
Rule of 72 is nothing but a method of estimating an investment doubling time. The number 72 when divided by the interest percentage per period we obtain the approximate number of periods (usually years) required for doubling.
The reverse also works true i.e. we can determine approx interest that should be earned to double and investment in fixed time frame.
Say you can get an Interest Rate of 12% p.a. then it will take approximately 72/12 i.e. 6 years to double the investment.
Say you need to double investment in 4 years Annual Rate of Interest / Return needed would be 72/4 i.e. 18%
Rule of 72 uses compound interest for calculation purpose.
Rule of 72 is nothing but a method of estimating an investment doubling time. The number 72 when divided by the interest percentage per period we obtain the approximate number of periods (usually years) required for doubling.
The reverse also works true i.e. we can determine approx interest that should be earned to double and investment in fixed time frame.
Say you can get an Interest Rate of 12% p.a. then it will take approximately 72/12 i.e. 6 years to double the investment.
Say you need to double investment in 4 years Annual Rate of Interest / Return needed would be 72/4 i.e. 18%
Rule of 72 uses compound interest for calculation purpose.
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