Exponential Growth and the Rule of 70.
There’s an easy way to figure out how quickly something will double when it’s growing exponentially.
Just divide 70 by the percent increase, and you’ve got the doubling time.
It works in reverse, too: divide 70 by the doubling time to find the growth rate.
What is the rule of 70 in economics?
The rule of 70 is a means of estimating the number of years it takes for an investment or your money to double. The rule of 70 is a calculation to determine how many years it’ll take for your money to double given a specified rate of return. The rule of 70 is also referred to as doubling time.
Why does the Rule of 70 work?
The Rule of 70 is commonly used in accounting and finance as a way of estimating the number of years (t) it will take for the principal investment (P) to double in value given a particular interest rate (r) and an annual compounding period. The Rule of 70 says that the doubling time is close to .
What is the 72 rule formula?
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.
Is the rule of 70 accurate?
However the Rule of 70 is not always so accurate. According to the Rule of 70, the principal and interest will double the initial principle after 70/100 = 0.7 years. The actual doubling time for an investment returning 100 percent each year is one year.