Question
The rule of 72 can be used to give an estimate of the
time period in which an inves t ment amount can grow by ______ , given the annual rate of return.Solution
The rule of 72 is a simple way to determine how long an investment will take to double ( i.e. grow by 100%), 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. However , the Rule of 72 is reasonably accurate for low rates of return. Â
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