Rule of 72
To quickly approximate the number of periods, practitioners sometimes use an ad hoc rule called the Rule of 72
: Divide 72 by the stated interest rate to get the approximate number of years it would take to double an investment at the interest rate. Here, the approximation gives 72/7 = 10.3 years. The Rule of 72 is loosely based on the observation that it takes 12 years to double an amount at a 6 percent interest rate, giving 6 × 12 = 72. At a 3 percent rate, one would guess it would take twice as many years, 3 × 24 = 72.
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