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; ...
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 ...
72 rule of compound interest 72 rule is a rule to calculate how many years the money can be doubled in a fixed interest. If the interest is 10% every single year, then how many years does it ...
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. ...
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. Interest Rate: % Years Required for Principal to Double Exact Answer: Rule of 72 Estimate: (We're assuming the interest is annually ...
How compound interest works You can also use the Rule of 72 to plug in interest rates from credit card debt, a car loan, home mortgage, or student loan to figure out how many years it'll take your money to double for someone else. ...
This formula is useful forfinancial estimatesand understanding the nature of compound interest. Examples: At 6% interest, your money takes 72/6 or 12 years to double. To double your money in 10 years, get an interest rate of 72/10 or 7.2%. ...
The Rule of 72 is an approximation and does not consider the specifics of compounding frequency. Exact calculations would use the compound interest formula, which is more complex and specific. Is there a different rule for tripling or quadrupling an investment?Yes, for tripling an investment, ...
The Rule of 72 applies to compounded interest rates and is reasonably accurate for interest rates that fall in the range of 6% and 10%. The Rule of 72 can be applied to anything that increases exponentially, such as GDP or inflation; it can also indicate the long-term effect of annual ...
How to Adjust the Rule of 72 for Higher Accuracy 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...