Sam Sez

Date: Wednesday, May 19, 2010

Question: ""Given today’s rates, how long to double my money?" "

Answer: It would take approximately 7,200 years. This is a simple application of the “Rule of 72.” The rule provides a quick answer for doubling money, assets, liabilities or other items via compounding. When you multiply the term or time by an interest rate that results in an answer of 72 you have your approximation. For example, an interest rate of 4 percent and a term of 18 years results in “72” or a doubling. Similarly, an interest rate of 1 percent compounded over 72 years would double your money. Since ZIRP (Zero Interest Rate Policy) has forced short term rates down to near zero or 1/100th of one percent it would take you 7,200 years to double your funds.

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