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SS - Investing Money

Rule of 72

The rule of 72 is a method of estimating the number of years that are required to double the amount of and investment at a given compound interest rate.

Compounding Interest is re-investing the interest back into the investment and receiving interest on the re-invested interest amounts in the following time periods (years).

Examples

How long will is required to double an investment of $1000 invested at 4% compounded annually?

72 ÷ 4 = 18 years

It will take about 18 years to double the investment at an annual compound interest rate of 4%.

Exercise #1

Create a spreadsheet that demonstrates the rule of 72.


You can follow the above layout
  • all shaded cells are formulas
  • if you change the Amount of Investment or the Yearly Interest Rate the entire spreadsheet will change
  • you will need to copy the formulas down for the correct Doubling Time periods
  • you do not need to shade the cells
  • WARNING:  
    • The rule of 72 requires the interest rate to be expressed as a percent i.e. 4 for 4%
    • The interest Calculations requires the interest rate to be expressed as a decimal value. i.e. 0.04 for 4%
    • your formulas must be adjusted accordingly

Exercise #2 - Adding Sheets to a Spreadsheet "Book"

Spreadsheet programs, including Google Sheets, allow for one file to hold multiple sheets
Add sheet to your file for each of the following  cases

 CaseInvestment  Interest Rate 
 1 $ 10,000 7.2%
 25,000 6.5% 
 3450 2.25% 
 41,750 3.75% 
 5200,000 10% 

Note: Copy and Pasting also works between sheets
  • to add an new sheet, press the big + icon on the bottom RHS of the window
  • If you set your sheets up correctly, only the interest rates and investment amounts need to be changed on your sheet
  • You will need to adjust the number of rows required to match the doubling time
  • some formulas will required absolute cell addressing
Right click on the sheet tab and a sheet can be:
  • duplicated
  • renamed
  • deleted 
  • ... and more
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