Quick Answer: Is The Rule Of 72 Accurate?

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Where is the rule of 72 most accurate?

It’s most accurate at an 8% interest rate, with 6-10% being its most accurate window. The general rule of thumb to help make the estimate more accurate is to adjust the rule by 1 for every 3 percentage points the interest rate differs from 8%.

Does the rule of 72 really work?

The Rule of 72 – Why it Works

69 by one hundred, so that the interest rate can be expressed as a percent instead of a decimal). It isn’t an estimate – it’s the exact answer for doubling your money, assuming that the interest is compounded continuously. It’s valid for any value of r.

What is the difference between the rule of 70 and the Rule of 72?

The rule of 72 is a simple method to determine the amount of time investment would take to double, given a fixed annual interest rate. Instead of using the rule of 70, he uses the rule of 72 and determines it would take approximately 7.2 (72/10) years for his investment to double.

How do you calculate Rule of 72?

The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.

How can I double my money in 3 years?

The rule can tell you how fast you can double your money. Divide 72 by the interest rate at which you are compounding your money, and you will arrive at the number of years it will take to double in value. For instance, you money will double in 3 years if you are compounding at 24 per cent (ie 72/24 = 3 years).

What will \$5000 be worth in 20 years?

How much will an investment of \$5,000 be worth in the future? At the end of 20 years, your savings will have grown to \$16,036. You will have earned in \$11,036 in interest.

Why is Rule 72 important?

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.

What will 300k be worth in 20 years?

How much will an investment of \$300,000 be worth in the future? At the end of 20 years, your savings will have grown to \$962,141.

How can I double my money in 5 years?

To use the rule of 72, divide the number 72 by an investment’s expected annual return. The result is the number of years it will take, roughly, to double your money.