Compound Interest Rate Rule of 72 | Interest Rates 72

Compound Interest Rate Rule of 72

Compound Interest Rate Rule of 72

A convenient technique for a quick estimation of compound interest rates, derived from the fact that a 7.2% return per year is the interest rate that will double the value of an investment in 10 years. Hence, the years needed to double an investment with a given annual rate of return can be estimated by dividing the "rate of return" into 72.

For example, if an investment's annual return is 6.0%, its value will double in approximately 12 years (72/6). If an investment's annual return is 9.0%, its value will double in approximately eight years (72/9).

Similarly, the "rate of return" that will double the value of an investment in a given number of years can be estimated by dividing the number of "years to double" into 72. For example, the value of an investment will double in six years, if the annual rate of return is approximately 12%.

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