1. What is the Rule of 72?

The Rule of 72 is a simple formula used to estimate the number of years required to double an investment at a fixed annual rate of return. It provides a quick mental calculation for compound interest growth.

2. How Does the Calculator Work?

The calculator uses the Rule of 72 formula:

Where:

• \( Rate \) — Annual interest rate (percentage)
• \( Years \) — Time required to double the investment

Explanation: The rule provides a close approximation of the time needed for an investment to double, assuming compound interest.

3. Importance of the Rule of 72

Details: This rule is valuable for quick financial planning, comparing investment options, and understanding the power of compound interest without complex calculations.

4. Using the Calculator

Tips: Enter the annual interest rate as a percentage (e.g., enter "6" for 6%). 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 approximation becomes less precise.

Q2: Can the Rule of 72 be used for other growth rates?
A: Yes, it can be applied to any exponential growth process, such as population growth or inflation calculations.

Q3: Why is the number 72 used in the formula?
A: 72 has many divisors, making mental calculations easier. It also provides a good balance between accuracy and simplicity.

Q4: What's the difference between Rule of 72 and Rule of 69.3?
A: Rule of 69.3 is more mathematically precise for continuous compounding, while Rule of 72 works better for annual compounding.

Q5: Does the rule work for negative interest rates?
A: No, the Rule of 72 only applies to positive growth rates. For negative returns, different calculations are needed.