For example if you wanted to double an investment in 5 years, divide 72 by 5 to learn that you’ll need to earn 14.4% interest annually on your investment for 5 years: 14.4 × 5 = 72. The Rule of 72 is a simplified version of the more involved compound interest calculation.
How do you calculate doubling time of an investment?
The rule is a shortcut, or back-of-the-envelope, calculation to determine the amount of time for an investment to double in value. The simple calculation is dividing 72 by the annual interest rate.
How long will it take money to double if it is invested at 5 compounded annually?
Or, if your money is earning a 5 percent interest rate, you’ll double it in 14.4 years (72 divided by 5 equals 14.4). If your money is earning a measly 1 percent interest rate, it will take you—yep, you guessed it—a whopping 72 years to double it.
How long does it take for an investment to double in value if it is invested at 13% compounded monthly?
1 Expert Answer
13 = 5.33 years and ln(2)/. 15 = 4.62 years.
How long will it take an investment to double in value using the Rule of 72 if its earn 2% 5% 10%?
How the Rule of 72 Works. For example, the Rule of 72 states that $1 invested at an annual fixed interest rate of 10% would take 7.2 years ((72/10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double ((1.107.3 = 2). The Rule of 72 is reasonably accurate for low rates of return.
What is the doubling formula?
Doubling time formula
doubling time = log(2) / log(1 + increase) , where: increase is the constant growth rate expressed as a percentage value, doubling time is the time needed for the quantity to double in value for a specified constant growth rate.
How many years will it take your investment to double with 2% interest rate?
For example, with a 9% rate of return, the simple calculation returns a time to double of eight years. If you use the logarithmic formula, the answer is 8.04 years—a negligible difference. In contrast, if you have a 2% rate of return, your Rule of 72 calculation returns a time to double of 36 years.
How long will it take $500 to double at a simple interest rate of 5%?
It’ll take 24 years for your investment to double.
How long will it take $1000 to double at 6 interest?
It will double faster. 151.57 months = 12.63 years.
Can I double my money in 5 years?
Let’s apply Thumb rule in a reverse way, if you wish to double your money say in 5 years, then you will have to invest money at the rate of 72/5 = 14.40% p.a. to achieve your target. This means you have to invest money in those financial products that will give you a return at 14.40% per annum.