Rule of 72Knowledge Center 
Description of Rule of 72. Explanation. 
12manage is the global knowledge sharing platform about management for managers, consultants, teachers, academics and students. Accelerate your professional development from now on with 12manage... 
Definition Rule of 72. Description.The Rule of 72 is a formula that is used in investing to approximate the number of years it will take to double money at a given (compound) interest rate. The calculation works by dividing 72 by the interest percentage you will receive, giving the number of years. Example: an investment gives an interest of 9%. The estimated time in years (t) it will take to double your investment is 72 / 9 = 8 years. The number of 69.3 or 70 is actually better, but the number 72 has as advantage it is easily divisible by many numbers: 2, 3, 4, 6, 8, 9, and 12 and works OK for most purposes. The exact number can be derived from the Formula Future Value = Present Value x ( 1 + Interest Rate )^{t} Suppose the money has doubled, this means that the Future Value then equals 2 Present Value. We can now substititute this in the formula and then cancel the factor Present Value. This results in 2 = (1 + Interest Rate)^{t} or: t ≈ 0,693147 / Interest Rate
Compare with: Time Value of Money  Net Present Value  Discounted Cash Flow  Internal Rate of Return  WACC 

Return to Management Hub: Decisionmaking & Valuation  Finance & Investing More on Management  Return to Management Dictionary  
This ends our Rule of 72 summary and forum. 
About 12manage  Advertising  Link to us / Cite us  Privacy  Suggestions  Terms of Service © 2019 12manage  The Executive Fast Track. V15.1  Last updated: 20102019. All names ™ of their owners. 