What is Rule 72
The Rule 72 is used in finance to determine how long it will take for money to double itself.Rule 72 is a financial term and methodology to calculate the period of time for doubling money itself. Therefore, as per rule 72, the approximate time period for money to double itself is determined by dividing 72 by the interest rate.Thus if interest rate is 9%, it will take approximately 8 years for the money to double itself.Further, if it is growing at 12% it will take approximately 6 years to double itself.
Now, let’s take an example to understand easily
Thus we can see from the above graph that there is an inverse relationship under rule 72 between interest rates and time period.The more is the interest rates, the lesser will be the time for money doubling and vice versa.