Often we see investment advertisements which promise to double our money in (say) 9 years. Sounds good, doesn’t it?
Or don’t you wonder sometime, in how many years your money would double, if a Mutual Fund has been historically providing a return of 12%? Or, if you have INR 50 lacs, given the inflation rate of 8% (say), in how years would its value reduce by half in present terms?
(Answer to the three questions above are given at the end of the article.)
The answer can be found out easily with a simple trick:
(Number of years to double) x (Rate of Interest p.a.) = 72
So, if someone promises you a rate of return of 9%, know that your money would be doubled in 8 years. If inflation is somewhere near 6%, know that your current kitty would be diminished by half in 12 years if not invested elsewhere.
Do the math!
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Answers: 8%; 6 years; 9 years.
Picture Courtesy: https://in.pinterest.com/pin/53902526760366711/
Note: This is an estimate to be used to make your life easier and does not give an answer accurate to the number of days. Also, the higher the expected rate of interest, the less accurate does the formula become but still you can use it safely!