Chapter 6, Problem 79QP

Summary Introduction

To show: The “Rule of 73” is slightly better than the “Rule of 72”

Introduction:

The “Rule of 72” states that the time required to double the investment is approximately 72 divided by r%(discount rate). It can be stated in the form of an equation as follows:

$t(\text{The period of investment})=\frac{72}{r\%(\text{Discount rate)}}$

Hence, the “Rule of 72” helps in finding the period of investment is (t), the discount rate is (r).