Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Assuming an inflation rate of 3%, how long before prices double?
Expert Solution
Step 1
Rule 72 is the rule that is helpful to know the no of years it would take to double the money. This method is very simple, easy to compute & also less time consuming.
This rule is also applicable for inflation, by knowing the inflation rate, we can estimate the no of years it would take for the price of the goods or the services to double itself.
Formula for for rule 72:
No of years for the cost to double = 72/Rate of inflation
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