The 72 rule is a formula that calculates how long it will take for something to double. The 72 rule is usually used with interest rates but the 72 rule is also used with return on investment and inflation. To use the 72 rule, simply divide 72 by the interest rate. As an example of the 72 rule: if your money earns 6 percent interest per year, just calculate 72/6 = 12; it will take 12 years for the investment to double. The 72 rule can also be used in reverse: to learn the interest rate needed to double your money in 8 years, divide 72 by 8, for an answer of 9% interest. The 72 rule can even be used to calculate the number of years it will take for the price of something to double, if you know the rate of inflation. For example, at 4% inflation, it will take 18 years, according to the 72 rule. |
