Rule of 72

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					        Rule of 72

Going on beyond doubling your
           money.
                  Albert Einstein

                             Credited for discovering
                            the mathematical equation
                            for compounding interest,
                              thus the “Rule of 72”

    “It is the greatest
mathematical discovery of
         all time.”
                                T=P(I+I/N)YN
           Beyond Doubling
• A=P(1+r/n)nt compounding interest
  – Annuities
  – Mutual Funds
  – Investments
  – Savings
  – Credit Cards
  – Loans
                   Example
We are going to purchase a new bedroom set. At
  Haverty’s Furniture a Cherry Classic bedroom
  set which includes King Poster bed, dresser,
  chest, and two night stands. The cost of the
  set is $7095. The interest rate is 24.9%. You
  have three years to pay this loan off.
A=7095(1+.249/365)3X365

Answer: 14971.31
                 Problem
We are to buy a car. What would you be willing
 to pay for a car? Keep in mind current car
 loans are five years and compounded daily.
 What are car dealers currently offering for
 interest rates?

				
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posted:9/19/2011
language:English
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