1. What is the Rule of 72?

The Rule of 72 is a simple way to estimate how long an investment will take to double given a fixed annual rate of interest. It's a quick, useful formula that's easy to remember and apply.

2. How Does the Calculator Work?

The calculator uses two main formulas:

Where:

• \( Time \) — Years to double investment
• \( r \) — Annual interest rate (%)
• \( Start \) — Initial investment amount
• \( t \) — Time period in years
• \( FV \) — Future value of investment

Explanation: The Rule of 72 provides an approximation of how long it takes for an investment to double. The second formula extends this to calculate the future value after any time period.

3. Importance of the Rule of 72

Details: This rule helps investors quickly estimate the effect of compound interest without complex calculations. It's useful for comparing different investment opportunities.

4. Using the Calculator

Tips: Enter your starting investment amount and annual interest rate. Optionally, you can enter a specific time period to see what your investment would grow to in that timeframe.

5. Frequently Asked Questions (FAQ)

Q1: How accurate is the Rule of 72?
A: It's reasonably accurate for interest rates between 6% and 10%. For rates outside this range, more precise calculations may be needed.

Q2: Can the Rule of 72 be used for other purposes?
A: Yes, it can estimate how long it takes for inflation to halve purchasing power or for debt to double at a given interest rate.

Q3: Why 72?
A: 72 has many divisors (2, 3, 4, 6, 8, 9, 12, etc.), making mental calculations easier. It also provides a good balance between simplicity and accuracy.

Q4: What's the difference between Rule of 72 and compound interest formula?
A: The Rule of 72 is an approximation, while the compound interest formula gives exact results. The Rule of 72 is meant for quick estimation.

Q5: When is the Rule of 72 most useful?
A: It's most useful for quick mental calculations or when you don't have a calculator handy to compare investment options.