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To: Cengiz Erbas who wrote (6208)12/3/1997 9:53:00 PM
From: Sector Investor  Read Replies (1) | Respond to of 42804
 
The rule is called the rule of 72 (not 75). Divide 72 by the rate of
return to get the number of years to double. 18% doubles in 4 years,
6% in 12 years, etc.



To: Cengiz Erbas who wrote (6208)12/3/1997 11:27:00 PM
From: Grommit  Read Replies (2) | Respond to of 42804
 
(1.25) (1.25) (1.25) = 1.95

to be exact, the amount of time it takes to double depends on the interest rate in:

n = log 2 / log (1+i)
because you are solving this equation, of course, by taking the log of both sides: FV/PV = (1+i)**n = 2 (to double)

The rule of 72 is quite close for 4% < i < 15% or so, and is much easier to use if you are at a cocktail party without a slide rule.

:o)


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