How it is calculated
The rule of 72 divides 72 by the percent rate and works well around 6–10% a year. The exact line uses yearly compounding, with no extra deposits and no tax.
Years ≈ 72 / rate, exact = ln 2 / ln(1 + rate)
Where the numbers come from
- Annual rate — unit in the field: %
Example
At 8% a year the rule gives 72 / 8 = 9 years. Exact doubling, compounded once a year, takes a little longer.
Questions
Does it work for a loan?
A debt at that effective rate doubles in the same time. An annuity schedule is built differently. The loan calculator does that.
Is the rate monthly or yearly?
Per year. 1% a month is not 1% per year.
Why two digits?
The upper figure is a rough estimate you can say aloud. The lower one is exact doubling with interest once a year.