There is a curious and helpful trick that allows us to mentally estimate annual compound interest amounts, where we are interested in doubling our money.The Rule of 72 works as follows.If we want to know how long it will take for our money to double, just divide 7272 by the interest ...
take for your money to double using compound interest. It’s called the Rule of 72 … Take 72 and divide it by the interest rate (as a whole number, not a percent) … and that tells you how many years it will take for your money to double. Really. ...
How to Use the Rule of 72 to Estimate Compound Interest Like most equations, you can move variables around to solve for others that aren’t certain. If you’re looking back on an investment you’ve held for several years and want to know what the annualcompound interest returnhas been; ...
Suppose you invest $100 at a compound interest rate of 10%. The rule of 72 tells you that your money will double every seven years, approximately: Years Balance Now $100 7 $200 (doubles every 14 $400 seven years) 21 $800 If you graph these points, you start to see the familiar...
Rule of 72 a common formula used to determine the years needed for money to double atcompoundinterest; divide 72 by the interest rate to get the number of years EXAMPLE: According to the rule of 72, $10,000 invested at 6 per cent interest doubles to $20,000 in twelve years....
5 B The Rule of 72 A “rule of thumb" is a shortcut or a commonsense approach to a situation.The Rule of 72 is a financial rule of thum b. This rule helps you estimate how long it will take for you to double your money with compound interest. It's simple, but it's also pret...
The Rule of 72 applies to cases of compound interest, not simple interest.Simple interestis determined by multiplying the dailyinterest rateby the principal amount and by the number of days that elapse between payments. Compound interest is calculated on both the initial principal and the accumulate...
The Rule of 72 is more accurate if it is adjusted to more closely resemble the compound interest formula—which effectively transforms the Rule of 72 into the Rule of 69.3. Many investors prefer to use the Rule of 69.3 rather than the Rule of 72. For maximum accuracy—particularly for conti...
Rule of 72 Usage and Importance of Compound Interest Calculation The formula for compound interest calculation is: C.I.= P (1 + r/n)^nt 1) Compound interest needs to be calculated on the principal amount plus the interest which has accumulated so far. ...
other two being compound interest and the time value of money). "The Rule of 72 can give you an idea of how many doubles you'll get in your lifetime. With more time, a lower interest rate may give you enough to nail your goals. With less time, you may need a higher interest ...