This article was co-authored by Paridhi Jain. Paridhi Jain is a Certified Public Accountant and the Co-Founder of Seva Ltd, a CPA firm operating in Maryland and Alabama. She has over 10 years of professional experience in the financial sector and has built a reputation for assisting small business owners navigate the intricacies of regulatory compliance, encompassing areas from company structuring and entity formation to detailed nexus determinations for income and sales tax. She is an active member of the Alabama Society of CPAs and has a certification in pre-professional accounting. She graduated Magna Cum Laude from the University of Maryland, Baltimore County with a major in Information Systems.
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The Rule of 72 is a handy tool used in finance to estimate the number of years it would take to double a sum of money through interest payments, given a particular interest rate. The rule can also estimate the annual interest rate required to double a sum of money in a specified number of years. The rule states that the interest rate multiplied by the time period required to double an amount of money is approximately equal to 72.
The Rule of 72 is applicable in cases of exponential growth, (as in compound interest) or in exponential "decay," as in the loss of purchasing power caused by monetary inflation.
Rate | Actual Years | Rule of 72 | Rule of 70 | Rule of 69.3 | E-M rule |
---|---|---|---|---|---|
0.25% | 277.605 | 288.000 | 280.000 | 277.200 | 277.547 |
0.5% | 138.976 | 144.000 | 140.000 | 138.600 | 138.947 |
1% | 69.661 | 72.000 | 70.000 | 69.300 | 69.648 |
2% | 35.003 | 36.000 | 35.000 | 34.650 | 35.000 |
3% | 23.450 | 24.000 | 23.333 | 23.100 | 23.452 |
4% | 17.673 | 18.000 | 17.500 | 17.325 | 17.679 |
5% | 14.207 | 14.400 | 14.000 | 13.860 | 14.215 |
6% | 11.896 | 12.000 | 11.667 | 11.550 | 11.907 |
7% | 10.245 | 10.286 | 10.000 | 9.900 | 10.259 |
8% | 9.006 | 9.000 | 8.750 | 8.663 | 9.023 |
9% | 8.043 | 8.000 | 7.778 | 7.700 | 8.062 |
10% | 7.273 | 7.200 | 7.000 | 6.930 | 7.295 |
11% | 6.642 | 6.545 | 6.364 | 6.300 | 6.667 |
12% | 6.116 | 6.000 | 5.833 | 5.775 | 6.144 |
15% | 4.959 | 4.800 | 4.667 | 4.620 | 4.995 |
18% | 4.188 | 4.000 | 3.889 | 3.850 | 4.231 |
20% | 3.802 | 3.600 | 3.500 | 3.465 | 3.850 |
25% | 3.106 | 2.880 | 2.800 | 2.772 | 3.168 |
30% | 2.642 | 2.400 | 2.333 | 2.310 | 2.718 |
40% | 2.060 | 1.800 | 1.750 | 1.733 | 2.166 |
50% | 1.710 | 1.440 | 1.400 | 1.386 | 1.848 |
60% | 1.475 | 1.200 | 1.167 | 1.155 | 1.650 |
70% | 1.306 | 1.029 | 1.000 | 0.990 | 1.523 |
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