Rule of 72 Approximation
Rule of 72 Approximation
\[t = \frac{72}{r}\]
Variables
t = doubling time in years
r = annual interest rate in percent
Description
What is this formula?
The Rule of 72 is a simple approximation used to estimate the number of years required to double an investment at a fixed annual interest rate.
When to use it
Use this formula for quick mental estimates of investment growth without performing detailed compound interest calculations.
Example
If the annual interest rate is 8%:
t = 72 / 8 = 9 years
The investment will approximately double in 9 years.
Applications
Personal finance, investment education, retirement planning, and quick financial analysis.
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