# Rule of 72

The rule of 72 is a quick mathematical formula that helps one find the approximate time duration in which investment made doubles in value when compounded annually by a fixed interest rate.

* Doubling Time (in years) = 72 / (Interest Rate (per annum)) *

**Know More:**

Rule of 72 gives an “approximate” time duration and the error increases with an increasing interest rate, hence using the formula is advised for smaller interest rates. Theoretically,

*Doubling Time (in years) = (ln(2)) / (ln(1+(0.01*Interest Rate)))*

For more accurate calculations, instead of 72, 69.3 can be used for better approximations.

**Example:**

Suppose a student invests Rs.100 in a scheme which gives an interest rate of 3% compounded annually. By the rule of 72, the investment doubles (i.e becomes Rs. 200) in 72/3 = 24 years. Using the theoretical formula, the actual time duration is 23.45 years, so the approximation holds good.