The Rule of 72

Always wanted to share with people what I have known about some basic financial knowledge. In this case will be The Rule of 72. This rule is a simple yet accurate formula to calculate interest rate or period as in year.

For instance, by knowing the annual average interest rate of a bank is 8%, the period that it will take for your capital to double up will be 72 / 8 = 9 years.

Similarly, by knowing the average inflation rate is 6%, the period of a product that will raised from it's initial cost to a double will be 72 / 6 = 12 years.

Of course you may also calculate the interest rate or inflation rate base on the given period. Let's say you can actually know what is the interest rate have to be if you would like to have your capital to be doubled up in 24 years time. Just simply apply 72 / 24 = 3%

As I said, this formula is rather simple yet useful :)