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Rule of 72

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Financial Dictionary

Rule of 72

A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.

Investopedia Commentary

For example, if you want to know how long it will take to double your money at 12 percent interest, divide 12 into 72 and you get six years.

Related Links

Understanding The Time Value Of Money
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See also: Compounding, Return

Also spelled: rule of seventy-two

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Financial Dictionary

rule of 72

The mathematical rule used in approximating the number of years it will take a given investment to double in value. The number of years to double an investment is calculated by dividing 72 by the annual rate of return. Thus, an investment expected to earn 10% annually will double the investor's funds in 72/10, or 7.2 years. Dividing 72 by the number of years in which the investor wishes to double his or her funds will yield the necessary rate of return.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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