Where Did The Rule Of 72 Come From?
Where Did The Rule of 72 Come From?
What is the Rule of 72?
The Rule of 72 is an easy way to estimate how long it will take an investment to double in value. You simply divide the number 72 by the interest rate of the investment. The result is the approximate number of years it will take for an investment to double in value. For example, if you have an investment with a 6% interest rate, it will take about 12 years for that investment to double in value (72/6=12).
The History of Rule of 72
The Rule of 72 is said to have originated in the 16th century. It was popularized by Italian mathematician and physicist Galileo Galilei. He was the first to use the rule to calculate the doubling time of a given sum of money. The Rule of 72 has been used and accepted ever since, and is still considered one of the most basic and useful calculations in finance.
How Does the Rule of 72 Work?
The Rule of 72 works by using the concept of exponential growth. Exponential growth is when a quantity grows at a rate that is proportional to its current value. For example, if you invest $100 at a 10% interest rate, after one year, you will have $110. After two years, you will have $121. After three years, you will have $133.10. This is exponential growth because the amount of growth increases with each year.
The Benefits of Using the Rule of 72
The Rule of 72 is a great way to quickly estimate the time it will take for an investment to double in value. It can also be used to compare different investments and determine which one will produce the highest returns in the shortest amount of time. Investors who use the Rule of 72 can make better decisions when it comes to investing their money.
Conclusion
The Rule of 72 is a simple and effective way to estimate how long it will take an investment to double in value. It is a great tool for investors who want to compare different investments and make the best decisions with their money. The Rule of 72 has been around since the 16th century and is still used today.
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