Rule of 72


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Rule of 72

A formula used to determine the amount of time it will take for invested money to double at a given compound interest rate, which is 72 divided by the interest rate. The logic is as follows. The time for an amount A to double is given by 2A=A(1+i)^t where ^ represents exponent and i is the interest rate, e.g. .05 is 5%. The A term cancels from both sides of the question. Solve for t by taking the natural log of both sides of the equation. Hence, t= [ln(2) over {ln(1+i)}], which is approximately equal to 0.72 over i. Hence the rule of 72.

Rule of 72

A rule of thumb estimating how long it will take for an investment to double. One calculates this by dividing 72 by the rate of return. The rule of 72 is not exact, but it provides a quick look at the effects of compounding on an investment.

rule of 72

The mathematical rule used in approximating the number of years it will take a given investment to double in value. The number of years to double an investment is calculated by dividing 72 by the annual rate of return. Thus, an investment expected to earn 10% annually will double the investor's funds in 72/10 , or 7.2 years. Dividing 72 by the number of years in which the investor wishes to double his or her funds will yield the necessary rate of return.
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RULE OF 72 Rule of 72 refers to the time value of money.
Let's use the Rule of 72, an accountant's rule-of-thumb, to find out how often things double at a given percentage.
For someone saving for retirement, an inheritance will allow the power of compound interest to work using the Rule of 72.
The new rule of 72 suggests that 72 divided by the inflation rate indicates the number of years before the value of your client's money is diminished by 50 percent.
For instance, if you were to invest $1,000 with compounding interest at a rate of nine per cent per annum, the rule of 72 gives 72/9 = 8 years required for the investment to be worth $2,000.
All you require is understanding of basic financial mathematics such as compound interest and Rule of 72.
The rule of 72 computes how long it will take money to double by dividing the interest rate into 72.
Now your loan is zero and your free-and-clear property has quadrupled to $400,000 (applying the Rule of 72 for estimating compounding periods to the U.
Based on the Rule of 72, if she averages a compound rate of return of about 12% a year on her investments, she should have about $1.
to market its proprietary subscription based financial tools through a direct marketing campaign that shares the idea of building wealth using The Rule of 72, a simple compound interest formula that Einstein referenced as the greatest mathematical discovery of all time.