Answer:
Explanation:
The rule of 72 is a formula used to measure the approximate time it will take for an investment to double. The word "approximate" should be highlighted, as it is not a 100% exact formula.
The formula used is to divide 72 between the interest rate paid by the investment. The result is the number of years in which the capital invested will double.
It is important to mention that at the interest rate or return on your investment you must subtract the inflation. For example, if the annual rate of return is 15%, and inflation is 5% per year, your net rate is 10%.
For example, if you have an investment of $ 10,000 in a mutual fund, which pays you 10% per year. If you calculate 72/10, you will see that your investment will double in 7.2 years.
Now, if there is an annual inflation of 2%, the calculation should be 72 / (10-2), with which the investment will double in 9 years.
