Question

Felicia put $8500 into a CD that pays 2.8% interest compounded semiannual. According to the rule of 72, approximately how long will it take for her money to double ?

Answer 1

25.7 years The rule of 72 is a simple approximation on how long it will take to double your money. You simply divide 72 by the interest rate and you'll have your estimate on the number of years it will take. So 72 / 2.8 = 25.7 years. To demonstrate that it's just an estimate, you can take the log of 2 and divide by the log of 1.028 to get the exact value. This far more complicated calculation gives the result of 25.1 years. And to be honest, the estimate of 25.7 years is more than close enough for such an quick and easy rule of thumb.