The Rule of 72 is: a. A tool to determine the number of years until retirement for an employee b. Used to estimate how fast prices will double using a given annual inflation rate c. The legal code for requiring companies to provide a match on retirement savings d. Used to calculate interest rates for savings

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Business

Tobias Bautista

1 May, 10:37

The Rule of 72 is: a. A tool to determine the number of years until retirement for an employee b. Used to estimate how fast prices will double using a given annual inflation rate c. The legal code for requiring companies to provide a match on retirement savings d. Used to calculate interest rates for savings

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Harrison Grant · Answer 1

b. Used to estimate how fast prices will double using a given annual inflation rate

Explanation:

Rule of 72 is a fast statistical method to determine how long an investment will double given annual interest rate.

Simply divide 72 by the annual interest rate.

Alternatively it can be used to calculated annual rate of return required to double investment.

Alternatively it can be used to calculate annual rate of return required to double an investment.

For example if $1,000 is to be doubled in 5 years.

Years to double = 72 / Interest

Interest = 72/5 = 14.4%