**Rule of 72**

Using your Unit 1 resources (linked below), answer the following questions:

Investopedia: Rule of 72 AND Napkin Finance: Rule of 72

**Beginning Balance**

**Interest Rate**

**Years to Double?**

**Ending Balance**

$500

3%

$1,500

5%

$15,000

9%

$150,000

12% 

The **Rule of 72** is a simplified way to estimate how long it will take for an investment to double at a fixed annual interest rate. To use it, you divide 72 by the interest rate to get the number of years needed to double the investment.

Let's apply the Rule of 72 to the provided scenarios:

### 1. $500 at 3% Interest Rate
- **Years to Double** = 72 / 3 = **24 years**
- **Ending Balance** after 24 years would be **$1,000**.

### 2. $1,500 at 5% Interest Rate
- **Years to Double** = 72 / 5 = **14.4 years** (approximately 14 years and 5 months)
- **Ending Balance** after 14.4 years would be **$3,000**.

### 3. $15,000 at 9% Interest Rate
- **Years to Double** = 72 / 9 = **8 years**
- **Ending Balance** after 8 years would be **$30,000**.

### 4. $150,000 at 12% Interest Rate
- **Years to Double** = 72 / 12 = **6 years**
- **Ending Balance** after 6 years would be **$300,000**.

### Summary
- **$500** at **3%** will double to **$1,000** in **24 years**.
- **$1,500** at **5%** will double to **$3,000** in **14.4 years**.
- **$15,000** at **9%** will double to **$30,000** in **8 years**.
- **$150,000** at **12%** will double to **$300,000** in **6 years**.

Would you like more details or have any questions?

### 5 Related Questions:
1. How does the Rule of 72 compare with the exact formula for compound interest?
2. What are some limitations of the Rule of 72?
3. Can the Rule of 72 be applied to non-annual compounding periods?
4. How does the Rule of 72 apply if the interest rate changes over time?
5. How does inflation impact the effectiveness of the Rule of 72?

**Tip:** The Rule of 72 is more accurate for interest rates between 6% and 10%. For rates outside this range, the estimation may be less precise.

Learn how to use the Rule of 72 to estimate how long it takes for an investment to double at a fixed annual interest rate. Examples include calculations for different initial balances and interest rates.

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