Difference between revisions of "Rule of 72"

Latest revision as of 23:49, March 24, 2019

The Rule of 72 is a rule of thumb used to estimate how long it takes money invested to double at a given interest rate.

The number 72 is placed into the numerator and the rate of interest (as a whole number) in the denominator, with the quotient being the approximate number of years (subject to rounding error). For example, if an interest rate is 6%, it will take approximately 12 years (72/6) for the investment to double.

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-The '''Rule of 72''' is used to estimate [[Interest|compound interest]], specifically how long it takes money to double under a given interest rate. The number 72 is placed into the [[numerator]] and the rate of interest in the [[denominator]]. The quotient is the number of years needed for the money to double, up to a small [[rounding error]].
+The '''Rule of 72''' is a rule of thumb used to estimate how long it takes money invested to double at a given interest rate.
+The number 72 is placed into the [[numerator]] and the rate of interest (as a whole number) in the [[denominator]], with the quotient being the approximate number of years (subject to rounding error).  For example, if an interest rate is 6%, it will take approximately 12 years (72/6) for the investment to double.
 [[Category:Finance]]