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The Rule of 72 The most important and simple rule to financial success .

The Rule of 72 The most important and simple rule to financial success. Albert Einstein. How are Albert Einstein and the Rule of 72 related?. T=P(I+I/N) YN. Credited for discovering the mathematical equation for compounding interest. The Rule of 72. Things to know about the Rule of 72.

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The Rule of 72 The most important and simple rule to financial success .

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  1. The Rule of 72The most important and simple rule to financial success.

  2. Albert Einstein How are Albert Einstein and the Rule of 72 related?

  3. T=P(I+I/N)YN Credited for discovering the mathematical equation for compounding interest

  4. The Rule of 72

  5. Things to know about the Rule of 72

  6. Doug’s Certificate of Deposit • Invested $2,500 • Interest Rate is 6.5% Doug invested $2,500 into a Certificate of Deposit earning a 6.5% interest rate. How long will it take Doug’s investment to double?

  7. Another Example The average stock market return since 1926 has been 11% Therefore, every 6.5 years an individual’s investment in the stock market has doubled

  8. Can the Rule be applied to debt? • It can show how fast a debt can double • It can show the impact of interest rates on debt YES

  9. Jessica’s Credit Card Debt • $2,200 balance on credit card • 18% interest rate Jessica has a $2,200 balance on her credit card with an 18% interest rate. If Jessica chooses to not make any payments and does not receive late charges, how long will it take for her balance to double?

  10. Another Example • $6,000 balance on credit card • 22% interest rate

  11. Jacob’s Car • $5,000 to invest • Wants investment to double in 4 years Jacob currently has $5,000 to invest in a car after graduation in 4 years. What interest rate is required for him to double his investment?

  12. Another Example • $3,000 to invest • Wants investment to double in 10 years

  13. Rhonda’s Treasury Note Rhonda is 22 years old and would like to invest $2,500 into a U.S. Treasury Note earning 7.5% interest. How many times will Rhonda’s investment double before she withdraws it at age 70?

  14. Another Example • $500 invested at age 18 • 7% interest • How many times will investment double before age 65?

  15. Any questions?

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