Rule of 72 The answers can be easily discovered by knowing the Rule of 72 The time it will take an investment (or debt) to double in value at a given interest.

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The “Rule of 72” Lesson Objectives: Understand compounding interest

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Presentation transcript:

The Rule of 72 The most important and simple rule to financial success.

Rule of 72 The answers can be easily discovered by knowing the Rule of 72 The time it will take an investment (or debt) to double in value at a given interest rate using compounding interest. 72 = Years to Interest Rate double investment (or debt)

What the “Rule of 72” can determine How many years it will take an investment to double at a given interest rate using compounding interest. How long it will take debt to double if no payments are made. The interest rate an investment must earn to double within a specific time period. How many times money (or debt) will double in a specific time period.

Things to Know about the “Rule of 72” Is only an approximation The interest rate must remain constant The equation does not allow for additional payments to be made to the original amount Interest earned is reinvested Tax deductions are not included within the equation

Assignment Now let’s practice! Use handout 1.14.3.A1