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The Rule of 72 is a simplified formula that calculates how long it'll take for an investment to double in value, based on its rate of return. The Rule of 72...
Rule of 72 Formula. The Rule of 72 is a simple way to estimate a compound interest calculation for doubling an investment. The formula is interest rate multiplied by the number of time periods = 72: R * t = 72.
In finance, the Rule of 72 is a formula that estimates the amount of time it takes for an investment to double in value, earning a fixed annual rate of return. The rule is a shortcut, or back-of-the-envelope, calculation to determine the amount of time for an investment to double in value.
Based on the rule of 72, you'd need to earn only 2.4% to double your money in 30 years. The equation would be 72/R = 30. R is the rate of return. Solving for R gives you 2.4.
The formula for the Rule of 72. The Rule of 72 can be expressed simply as: Years to double = 72 / rate of return on investment (or interest rate) There are a few important...
Here’s the formula: Years to double = 72 / Interest Rate. This formula is useful for financial estimates and 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 helps an investor calculate how long it will take for an investment to double given a fixed annual rate of interest. Here's how to use it.