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The equation to determine the future value of an amount of month that is earning interest is FV=PV*(1+r)^t.
FV = Future Value
PV = Present Value
r = interest rate per period
t = number of periods
If you divide both side by PV you get FV/PV=(1+r)^t.
The rule of 72 is used to calculate how long it takes money to double in value. Therefore FV/PV =2
2=(1+r)^t
Take the natural log of both sides and you get...
ln(2) = ln(1+r)^t which equals ln(2) = t*ln (1+r)
For small values of r (remember this is a percentage) ln(1+r) ~ r
r*t = ln(2)
r*t = 0.693. So technically is should be the rule of 69.3. However, 72 is evenly divisible by far more numbers, and since this is for doing ball park numbers in your head, it is close enough. However feel free to use 70 as well if it works better (multiples of 5 or 7).
Eagle
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∙ 13y ago
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What is rule 72?
How long it will take for your money to double/divide the annual interest rate into 72.
Who came up with the rule of 72?
Benjamin Franklin came up with this equation.
What is the best diffinition for rule 72?
the number of years it takes for your money to double can be estomated by dividing 72 by the annual percentage interest rate.
What is the rule for 72 63 54 45 36?
Each step is nine less.
What is the pattern rule for 2 12 72 432?
Multiply each value by 6.
Who discovered the rule of 72?
Albert Einstein
How long did asoka rule?
72 years
What are the release dates for The Girl's Guide to Depravity - 2012 Rule 72 The Unavailable Rule 1-10?
The Girl's Guide to Depravity - 2012 Rule 72 The Unavailable Rule 1-10 was released on: USA: 30 March 2012 Japan: 15 September 2012
What is rule 72?
How long it will take for your money to double/divide the annual interest rate into 72.
How long does Oxycontin stay in urine?
As a general rule.....72 hours.
How long did Louis XVI rule for?
About 18 years.
Where did the rule come from in volleyball?
what rule
What is the best definition of the rule 72?
The best definition for 72 is the number before 73 and after 71.
Why should a consumer know and understand the rule of 72?
Rule of seventy two is used to ascertain the period by which an investment would grow by 100%. 72 divided by rate of interest would provide the approximate period by which the investment would become double. As an example, if the rate of interest is 6% per month, the investment would be doubled in ( 72/6) 12 months. Rule of 72 thus is an important tool to know the investment horizon.
What is the rule of 72 in savings and investments?
The rule of 72 is a quick and very accurate method of determining how long it takes for money to double at a specified rate of interest, compounded annually. For example, using the rule of 72 with a compounded interest rate of 6% it would take 12 years to double your money (72 divided by 6). The precise amount of time it takes to double your money at 6% based on the actual computation of compounded interest is 11.9 years. The rule of 72 works very well unless the rate of interest exceeds 20% at which point the error rate starts to deviate substantially from the actual answer. The rule of 72 can also be used to figure out what rate of interest you need to double your money in a specified number of years. For example, if you want to double your money in 5 years, divide 72 by 5 and the interest rate needed is 14.4%.
Who came up with the rule of 72?
Benjamin Franklin came up with this equation.
What annual interest rate will cause your money to double in 4 years?
The "Rule of 72" gives a good approximation of 72/4=18%.
