stock investment
Do we use the simple interest rate to calculate the issue of investment in related activities?
I was giving the following question: Jack purchased 100 shares of the store price of $ 25 per share. It expects to double its investment. How long will it take if the price increases of shares at a rate of 10% per year? Because the money you earn by rising stock prices will never again put on their investment. Therefore, only make sense whether the use of simple interest to calculate the correct?
Simple interest can be used, but when you are trying to find out how long it will take investment for a double, then you should use the rule of 72. This will tell you the number of years it will take to double your money, but only when the interest (rate) is compounded each year. You simply take "72" and is divided between the interest rate. In this case, 72/10 = 7.2 years until your money is doubled. This also works in reverse if you want to know what interest rate needed to double your money in the desired time frame, (72 / 6 years = 12% requires interest rate. I hope that helps.
Stock Investing For Dummies ( cd 1) part 1
