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Variants of the Rule of 72: Rule of 69 and Others
Jasleen Kaur, Manager, India
An important important note to make with regard to the usage of the Rule for 72 is that the rule is said to be fairly accurate within an interest range from 6% to 10%. Any interest rate outside this bracket needs adjustments to create an accurate rule. How? It can be adjusted by adding or subtracting 1 from 72 for every 3 points the interest rate diverges from 8%.
In order to clarify the above, some examples are provided below:
- 11% annual compounding interest, the Rule of 73 should be used instead of 72 (Here is how: 72+1 as there is a 3 point difference between 8 and 11)
- For 14%, it would be the Rule of 74; (72+2 as there is a 6 point difference between 8 and 14)
- For 2%, the Rule of 70; (72-2, as there is a 6 point difference between 8 and 2. Also we didn't add but subtract as 2 is going lower than 8
When dealing with interest earned over interest (continuous compounding), one should use the Rule of 69. For example, your investment grows at a continuous rate of 1.2% everyday. In how many days will your investment double? The answer will be: 69/1.2= 57.5 days.
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