Friday, October 3, 2008

Rule of 72 - a quick calculation check

There are only 3 numbers involved:

1. 72
2. Interest rate
3. Number of years to Double your money
(Number of years to Double your money) = 72 / (interestRate)
or
(interestRate) = 72 / (Number of years to Double your money)
For example, back in the last posting where it says :

CAR is the BIGGEST Threat in Malaysia Personal Finance Planning

There are one of the calculation says $3 in 1995 to $11 in 2008 is 10%.

Basically there are about 14 years from 1995 to 2008.
$3 double once is $6 and $6 double again is $12 (close to $11).
So it takes $3 to double Twice  in 14 years or 
it doubles every 7 years !
72 /  7 = 10
So doubling every 7 years means the interest rate is about 10% !!

2 comments:

Anonymous said...

Is this Kabbalah related?

Michael Tsen said...

sorry, not sure what that is ...