This is a quick way to calculate how long it will take to double your money if it is invested at a particular interest rate.
It is all about the power of time.
You take the interest rate you expect to earn and divide it into 72.
If you expect a return of 6%, 72/ 6 = 12, it will take 12 years to double your money.
How do you calculate Rule of 72?
The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.
What is the rule of 72 examples?
The rule of 72 is a method used in finance to quickly estimate the doubling or halving time through compound interest or inflation, respectively. For example, using the rule of 72, an investor who invests $1,000 at an interest rate of 4% per year, will double their money in approximately 18 years.
How does the 72 rule work?
The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.20 Jun 2019
Does Rule of 72 include compounding?
Variations in Applying the Rule of 72
For example, the rate of 11% annual compounding interest is 3 percentage points higher than 8%. The basic rule of 72 says the initial investment will double in 3.27 years.11 Apr 2019