Investment basics · Question 11 of 12
Which statements follow from the rule of 72?
2 answers are correct. Hard
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Answer
- A At a return of 8% a year, capital doubles in about 9 years
- D At 3% inflation, purchasing power halves in about 24 years
Explanation
72 / 8 = 9 years and 72 / 3 = 24 years. At 6% it would be around 12 years, and at 2% inflation around 36 years. The rule is an approximation and becomes less accurate at very high rates.