Bhavesh's Tryst

Saturday, August 26, 2017

Interest calculation 82

*RULE 72*

*What is Rule 72?*

In personal finance, if you divide the number 72 by the rate of interest, you get to know the number of years it will take for you to double the money..

Eg: if the rate of interest is 9%, simply divide the number 72 by 9% and the answer is 8. Thus it will take 8 years to double your money if you invest at 9% p.a. rate of interest.

*INTEREST:* We can use this rule in reverse to know the rate of interest needed to double your money to achieve your set goal.

Eg: If you have 250k today and you need 500k in 5 years. Just divide the number 72 by 5, the answer is 14.41%. Thus you need a type of investment avenue, where you earn at least 14.41% p.a. as rate of interest/returns to double your investment amount in 5 years.

*INFLATION:*

This 'Rule 72' helps you to understand about inflation also. It helps you to calculate the amount of time it will take for inflation to make the real value of money half. Let's say present inflation is 5.5%. When you divide 72 by 5.5% the answer is 13.09 years.  That is to say, if you have 100k in your kitty today, it would take around 13.09 years for the value of the money to be halved..

Hope it helps you in your day to day investments and other finance related activities.

posted by Bhavesh Jhaveri  # 11:26 AM

Archives

June 2006   July 2006   July 2007   October 2007   March 2008   April 2008   September 2008   October 2008   October 2010   November 2010   December 2010   January 2011   February 2011   March 2011   April 2011   May 2011   June 2011   July 2011   August 2011   September 2011   October 2011   November 2011   December 2011   January 2012   February 2012   March 2012   April 2012   May 2012   June 2012   July 2012   August 2012   September 2012   October 2012   November 2012   December 2012   January 2013   February 2013   March 2013   April 2013   May 2013   July 2013   August 2013   September 2013   October 2013   November 2013   December 2013   January 2014   February 2014   March 2014   May 2014   July 2014   August 2014   September 2014   October 2014   November 2014   December 2014   January 2015   September 2015   October 2015   November 2015   February 2016   March 2016   May 2016   June 2016   July 2016   August 2016   September 2016   October 2016   November 2016   December 2016   March 2017   April 2017   May 2017   June 2017   July 2017   August 2017   September 2017   March 2018   April 2018   May 2018   June 2018   July 2018   September 2018   January 2019   March 2019   September 2019  

Subscribe to Posts [Atom]