Question

Mauricio plans on retiring in 20 years, and he wants to double his money by that time. He has contacted various banks, looking for a CD that compounds interest monthly, and to calculate what annual interest rate he needs, he is using the rule of 72. What is the rule of 72?

Answer 1

The rule of 72 is a very simple way to estimate and determine the number of years required to double your investments given a fixed annual rate of interest. It can also estimate and then calculate the annual interest rate required to double an investment in a given number of years. In the rule of 72, you can either choose to calculate the annual interest rate or the number of years.  

Use this formula to calculate the rule of 72

Rule of 72  ≈ 72 ÷ interest rate ≈ number of years to double