The "Rule of 72" is a reliable guide to the impact of inflation. It is based on dividing 72 by the annual inflation rate to find out the number of years it will take the price of something to double. For example, if you bought an antique chair for $100, and the annual inflation rate is 5 percent, how long would it take for the chair to be worth $200? Using the Rule of 72, divide 72 by 5 and get 14.4. It would take about 14 years for the chair's worth to double. 1. Calculate the values below using the Rule of 72. a. If you bought a house for $150,000 and the annual inflation rate was 4 percent, how long would it take before the house, under good maintenance, would be worth $300,000? b. If you bought a Picasso painting at last week's auction for $200,000 and the annual inflation rate is 10 percent, how long would it take to double your money? c. If you went to the car show and bought a 1965 Mustang in mint condition for $25,000 and the annual inflation rate was 8 percent, when would your investment double?
The "Rule of 72" is a reliable guide to the impact of inflation. It is based on dividing 72 by the annual inflation rate to find out the number of years it will take the price of something to double. For example, if you bought an antique chair for $100, and the annual inflation rate is 5 percent, how long would it take for the chair to be worth $200? Using the Rule of 72, divide 72 by 5 and get 14.4. It would take about 14 years for the chair's worth to double.
1. Calculate the values below using the Rule of 72.
a. If you bought a house for $150,000 and the annual inflation rate was 4 percent, how long would it take before the house, under good maintenance, would be worth $300,000?
b. If you bought a Picasso painting at last week's auction for $200,000 and the annual inflation rate is 10 percent, how long would it take to double your money?
c. If you went to the car show and bought a 1965 Mustang in mint condition for $25,000 and the annual inflation rate was 8 percent, when would your investment double?
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