Definitions for "RULE OF 72"
A very easy method of estimating the number of years it takes for an investment's value to double at a specific interest rate or rate of return. For a complete explanation see Rule of 72.
The rule of 72 shows how long it will take to double the money invested. The formula is used by many financial advisors and is easy to use. Divide the percentage rate of return into 72. The answer should be the number of years it will take to double the investment. One thing to remember, the rule is based on a fixed annual rate of return. Example, a $5,000 investment with a 5% annual rate of return would take 14.4 years to double. Example 5% divided into 72=14.4 years. Example 10% divided into 72=7.2 years. Example 15% divided into 72=4.8 years.
A formula used to determine the amount of time it will take for invested money to double at a given compound interest rate, which is 72 divided by the interest rate.
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