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  • Cristian Steven Palma Diaz - The Rule of 72

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    The document discusses the rule of 72, which states that to find the number of years required for an investment to double in value at a given interest rate, you divide 72 by the interest rate. It provides an example table showing how $2500 invested at ages 16, 28, 34, etc. would grow over time at interest rates of 3%, 6%, and 12%. It notes that higher interest rates carry higher risk but more potential for growth, and younger investors have more time to recover from losses. The rule of 72 also applies to high interest credit card debt, which can double very quickly if only minimum payments are made.

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    The document discusses the rule of 72, which states that to find the number of years required for an investment to double in value at a given interest rate, you divide 72 by the interest rate. It provides an example table showing how $2500 invested at ages 16, 28, 34, etc. would grow over time at interest rates of 3%, 6%, and 12%. It notes that higher interest rates carry higher risk but more potential for growth, and younger investors have more time to recover from losses. The rule of 72 also applies to high interest credit card debt, which can double very quickly if only minimum payments are made.

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    © All Rights Reserved
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    29 views1 page

    Cristian Steven Palma Diaz - The Rule of 72

    Uploaded by

    api-538376298
    The document discusses the rule of 72, which states that to find the number of years required for an investment to double in value at a given interest rate, you divide 72 by the interest rate. It provides an example table showing how $2500 invested at ages 16, 28, 34, etc. would grow over time at interest rates of 3%, 6%, and 12%. It notes that higher interest rates carry higher risk but more potential for growth, and younger investors have more time to recover from losses. The rule of 72 also applies to high interest credit card debt, which can double very quickly if only minimum payments are made.

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    © All Rights Reserved
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    THE RULE OF 72 CALM 20

    Name: _________________________________

    A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide
    the compound return into 72. The result is the approximate number of years that it will take for your investment to
    double

    Your age today: 3% 6% 12%


    _________16____ $2500 $2500 $2500

    +622

    +6 28 $5000 $5000

    +6 34 $ 10,000

    +6 40 ______________ __$5000 _ $10,000 $20,000

    +646 $40,000

    +6 52 _____________ $20,000 $80,000

    +6 58 $160,000

    +6 64 ______________ $10,000 40,000 $320,000

    +6 70 _ $640,000

    +6 76 _____________ _________ $80,000 $2560,000

    Remember: The higher the interest rate, the higher the risk of the
    investment. The money needs to have time to build up. The younger
    you are, typically the higher the risk you can take with your money, in
    that you have more time to recover losses and see overall growth.

    The rule of 72 also applies to credit cards that may have up to 30%
    interest rates! Making minimum payments only, will allow your debt
    to double very quickly.

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