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 the Rule of 72 formula:

Where:

• 72 — The constant number in the rule
• Interest Rate — The annual rate of return (in percentage)

Explanation: By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to double.

3. Importance of the Rule of 72

Details: This rule is valuable for quick mental calculations to compare different investment opportunities and understand the power of compound interest.

4. Using the Calculator

Tips: Enter the expected annual interest rate in percentage (e.g., for 5% enter 5). The rate must be greater than 0.

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, the rule becomes less precise.

Q2: Why 72?
A: 72 has many divisors (1, 2, 3, 4, 6, 8, 9, 12, 18, 24, 36, 72), making mental calculations easier. It also provides a good balance between accuracy and simplicity.

Q3: Can the Rule of 72 be used for inflation?
A: Yes, it can estimate how long it would take for prices to double at a given inflation rate.

Q4: What's the difference between Rule of 72 and Rule of 69?
A: Rule of 69 is more accurate for continuous compounding, while Rule of 72 works better for annual compounding.

Q5: Does this account for taxes or fees?
A: No, the Rule of 72 doesn't account for taxes, fees, or other factors that might affect actual returns.