Have you heard of the financial rule of 72 because it doesn't work. Could you create a formula to correctly predict the amount of time it would take to double a savings account compounded annually with compound interest based on the interest rate?

Guest Feb 28, 2017

#1**+5 **

Rule of 72 was created some 100 years ago, when there were no calculators and computers to estimate to doubling time of an investment. But today, it is considered obsolete. If you took a rate such as 10%, how long would it double the investment? You would simply divide 72/10=7.2 years for the investment to double. But with modern calculators and computers, you can get the exact period of time that the investment would double at 10%. A calculator will give you: 7.27 years for the investment to double at 10%. A t 15%, it would take 72/15 =4.8 years, while with a calculator, it would be: 4.96 years exactly and so on.....

The formula you would use for the calculator would be this: FV =PV[ 1 +R]^N =2=1[1 +R]^N. If you know R=interest rate, then you would solve for N=number of years to double the investment.

Guest Feb 28, 2017