If you purchase a stock that has a 7% average annual return, the rule of 70...
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If you purchase a stock that has a 7% average annual return, the rule of 70 says that its value should double in about [ ✓years. However, there is another force at work against your investment: inflation. If the government holds inflation at a manageable rate of 2% over the same time, then Fisher's approximation says that the real interest rate (R = i-TT) should be about %; in which case your investment would double in real terms in about years In a hyperinflation of 5,000% or more per year, prices will double every ✓years (this is the trick answer), while investments like the 7% stock still take ✓years to double. As a result, people in hyperinflation countries usually take their money out of the stock market, contributing to a crash If you purchase a stock that has a 7% average annual return, the rule of 70 says that its value should double in about [ ✓years. However, there is another force at work against your investment: inflation. If the government holds inflation at a manageable rate of 2% over the same time, then Fisher's approximation says that the real interest rate (R = i-TT) should be about %; in which case your investment would double in real terms in about years In a hyperinflation of 5,000% or more per year, prices will double every ✓years (this is the trick answer), while investments like the 7% stock still take ✓years to double. As a result, people in hyperinflation countries usually take their money out of the stock market, contributing to a crash
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Related Book For
Economics
ISBN: 978-0073375694
18th edition
Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn
Posted Date:
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