# RULES OF 72

sekiranya anda konsisten 12% return setahun, dalam masa 48 tahun akan menjadi seperti diatas.

Sekiranya konsisten 12% setiap bulan...hanya dalm 48 bulan.

## Rule Of 72

What is the 'Rule Of 72'

rate of return

**Years required to double investment = 72 ÷ compound annual interest rate**

Note that a compound annual return of 8% is plugged into this equation as 8, not 0.08, giving a result of 9 years

BREAKING DOWN 'Rule Of 72'

compound interest

**T = ln(2)/ln(1.08)=9.006**

Most people cannot do logarithmic functions in their heads, but they can do 72 ÷ 8 and get almost the same result. Conveniently, 72 is divisible by 2, 3, 4, 6, 8, 9, and 12, making the calculation even simpler.

inflation

#### Adjusting For Higher Rates

The rule of 72 is reasonably accurate for interest rates between 6% and 10%. When dealing with rates outside this range, the rule can be adjusted by adding or subtracting 1 from 72 for every 3 points the interest rate diverges from 8%. So for 11% annual compounding interest, the rule of 73 is more appropriate; for 14%, it would be the rule of 74; for 5%, the rule of 71.

For example, say you have a 22% rate of return (congratulations). The rule of 72 says the initial investment will double in 3.27 years. Since 22 – 8 is 14, and 14 ÷ 3 is 4.67 ≈ 5, the adjusted rule would use 72 + 5 = 77 for the numerator. This gives a return of 3.5, meaning you'll have to wait another quarter to double your money. The period given by the logarithmic equation is 3.49, so the adjusted rule is more accurate.

#### Adjusting For Continuous Compounding

continuous compounding

CREDIT: INVESTOPEDIA