Friday, October 3, 2008

INTERESTING: RULE OF 72



1. Rule of 72 is an intersting thing to know. Bank officers and Account officers use this rule as a thumb rule. It is not exact but it is a good guide line. Housewives can apply this rule to their savings and investments to find out as to how much their money will grow at a particular Rate of Interest and in specific number of years.

2. Rule of 72 says that if you divide 72 by the Rate of Interest, it will give you the number of years in which your money will double at that Rate of Interest.

3. It means if you are investing your money with assured Rate of Interest of 18 %, it will double your money in approximately 72/18=4 years. Always remember that the it is Compounded Rate of Interest and not Simple Rate of Interest.

4. Now you know that if a financial institution or a bank is offering 9 % Compounded Rate of Interest, then your money will double in approximately 72/9=8 years.

5. You can use this formula to find out as to what is the Rate of Interest is being offered to you by a particular financial institute for any offering e.g. if some one is offering you with a scheme that your money will double in 5 years, then the Compounded Rate of Interest offered to you is approximately 72/5= 14.4 % per annum.

6. I am sure this information will be a handy one for all of you.

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