Wednesday, August 15, 2007
The Value of Money Then and Now
The question came up last night about the sum that JT pays Jed in Tall Tales for the "mineral rights" to his land, and what that would be worth today.
Here's a handy fact:
A lump sum grows in value. The Rule of 72 states that an investment at a particular interest rate will double in a certain number of years. You can easily determine how quickly your investments will double simply by dividing 72 by the interest rate that you anticipate receiving in a given investment. For example, an investment that will yield 10% per year will double approximately every 7.2 years (72/10 = 7.2). A 12% yield would mean your investment doubles every 6 years.
Using this math and assuming a 4% interest rate over time, the sum that JT pays Jed Rowan in 1885's Tall Tales would double every 18 years (72/4). Anyone want to venture a guess at its value today?