Its fun time, let play some mathematical percentage game, for those who love maths this would a really fun game for you. Let us play the compounding interest formula game to learn and understand what is rule of 72 meaning, rule of 72 formula, examples of rule of 72, Why does the rule of 72 work, rule of 72 calculator, rule of 115 meaning, rule of 115 formula, rule of 115 example, rule of 114 calculator, rule of 114 meaning, rule of 114 formula, examples of rule of 114, rule of 114 calculator, what is rule of 144 meaning, rule of 144 formula, examples of rule of 144, rule of 144 calculator and all about.
Rule of 72 Definition:
Rule of 72 was introduce by luca pocioli nearly about 500 years back. Luca pocioli lived for 69 years from 1445 to 1514 calendar year. A book called ‘summa de arithematica’ has put the light on how you can estimate and evaluate duration to double your investment in simplest way by compounding interest formula. Rule of 72 means that Divide the number 72 with the rate of interest and witness the magical number which states number of years for your capital to double.
Deriving rule of 72 in finance, rule of 70 and rule of 69.3 are different ways for the estimating excellent investment’s doubling duration. Their rule of 72 proof to be separated because of the interest amount per many years to get the estimated period necessary for doubling. Although scientific rule of 72 calculator and spreadsheet have functions discover their precise doubling period.
Rule of 72 Formula:
Here deriving Rule of 72 formula offer you to have simple calculation where you can solve your equation of doubling the investment time period.
Rule of 72 Formula: N = 72 / R.
Where: (1) N = Number of times, generally many years.
(2) 72 = Is the constant variable.
(3) R = Rate of interest.
Rule of 72 Example:
Rule of 72 Example: Suppose Mr. Shah meets bank representative to get latest fixed deposit schemes. Mr. Shah uncover that best bank offer is 10% annual interest; let’s see how many years it takes to double your investment capital with rule – 72.
Formula says that Divide 72 by 10 (i.e. rate of interest).
You get result as where, Your invested capital can be doubled in 7.2 years of a period as a compounding interest.
Example of Rule of 72: Mrs. Maria best credit card limit is Rs.25,000/- and rate of interest at which she need to repay is 18%. Let’s figure out how much time period will require when Mrs. Maria will repay as a double amount.
As per formula says that Divide 72 by 18 (i.e. interest rate).
Result would be, Within 4 years Mrs. Maria would repay double amount if she fails to clear credit card bills.
Rule of 72 Calculator:
Here you can download rule of 72 calculator in excel from the below link. In this below link you get rule of 72 calculator along with rule of 114 calculator and rule of 144 calculator. You should download and can try by yourself to understand the concepts in much details.
Download Link: Rules of 72 Calculator – Rules of 114 Calculator – Rules of 144 Calculator
Why does the rule of 72 work?
The value 72 actually convenient choice of numerator, since it’s lots of little divisors: 1, 2, 4, 6, 8, 3, 9, 12. It offers good approximation for annual compounding, and for compounding to typical rate. Your approximations may not be so correct to higher rates of interest.
For continues power of compounding, rule of 69 offers a valid result for any rates. Considering daily compounding looks close plenty of towards continuous compounding, for most reasons rule of 69, rule of 69.3 or rule of 70 is better than rule of 72 for everyday compounding. For the lower yearly rate compared to those preceding, 69.3 would definitely be more accurate than 72.
Rule of 72 Worksheet / Rule of 72 Proof:
Here in this below table specially prepared to showcase rule of 72 worksheet along with the rule of 72 proof. Also you can see the difference between rule of 70 vs 72 as well.
Rate | Actual Years | Rate * Actual Years | Rule of 69.3 | Rule of 70 | Rule of 72 |
0.25% | 277.605 | 69.401 | 277.20 | 280.00 | 288.00 |
0.50% | 138.976 | 69.488 | 138.60 | 140.00 | 144.00 |
1% | 69.661 | 69.661 | 69.30 | 70.00 | 72.00 |
2% | 35.003 | 70.006 | 34.65 | 35.00 | 36.00 |
3% | 23.45 | 70.349 | 23.10 | 23.33 | 24.00 |
4% | 17.673 | 70.692 | 17.33 | 17.50 | 18.00 |
5% | 14.207 | 71.033 | 13.86 | 14.00 | 14.40 |
6% | 11.896 | 71.374 | 11.55 | 11.67 | 12.00 |
7% | 10.245 | 71.713 | 9.90 | 10.00 | 10.29 |
8% | 9.006 | 72.052 | 8.66 | 8.75 | 9.00 |
9% | 8.043 | 72.389 | 7.70 | 7.78 | 8.00 |
10% | 7.273 | 72.725 | 6.93 | 7.00 | 7.20 |
11% | 6.642 | 73.061 | 6.30 | 6.36 | 6.55 |
12% | 6.116 | 73.395 | 5.78 | 5.83 | 6.00 |
15% | 4.959 | 74.392 | 4.62 | 4.67 | 4.80 |
18% | 4.188 | 75.381 | 3.85 | 3.89 | 4.00 |
20% | 3.802 | 76.036 | 3.47 | 3.50 | 3.60 |
25% | 3.106 | 77.657 | 2.77 | 2.80 | 2.88 |
30% | 2.642 | 79.258 | 2.31 | 2.33 | 2.40 |
40% | 2.06 | 82.402 | 1.73 | 1.75 | 1.80 |
50% | 1.71 | 85.476 | 1.39 | 1.40 | 1.44 |
60% | 1.475 | 88.486 | 1.16 | 1.17 | 1.20 |
70% | 1.306 | 91.439 | 0.99 | 1.00 | 1.03 |
Rule of 70 vs 72:
Here we will see the difference between rule of 70 and rule of 72 in the below rule of 70 vs 72 comparison. Check it out!
Rule of 70 | Rule of 72 |
(1) Rule of 70 means number of years it can take for a value towards doubling dividing that by 70 because of the variable’s growth rate. The rule of seventy is typically used to determine how long it would take for an investment towards doubling of the annual rate of interest. | (1) Rule of 72 means a simple way to figure out the actual quantity of time a good investment will take in order to double its value, provided a set yearly interest rate. |
(2) Rule of 70 Example: If an investor invests 100,000 at 10% fixed annual interest rate. He desires to estimation the number of years it would require to grow 200,000 of their investment. Rule of 70 Formula: N = 70 / R Conclusion: This person applications your rule of 70 and decides it would take around 7 years (70/10) to double their investment. | (2) Rule of 72 Example: Assume one individual invests 200,000 in a 10% fixed rate of interest annually. This person wants to approximate the number of many years it would bring to double its investment. Rule of 72 Formula: N = 72 / R |
Rule of 114 Definition:
Rule of 114 means, it is similar to Rule 72 by all ways expect one item, Rule of 114 will assist you to figure out the time duration required to triple your capital investment by using compounding interest formula. Rule of 114 definition says that divide 114 by interest rate to get the years essential to triple your money. Many times, it is been noticed that Rule of 115 is been used instead of Rule of 114. As Rule of 115 means it shows how much time taken to triple your investment capital, it is again similar to rule 114 in all the ways. Mostly this rule is been used frequently rather than taking rule of 115 examples to calculate time taken to grow your investment triple of its value.
Rule of 114 Formula:
Here Rule of 114 formula assist you to solve your equation of tripling the investment time period with a simple calculation. Similarly, you can use Rule of 115 formula to calculate the same and you can choose any one which best suits your requirement.
Rule of 114 Formula: N = 114 / R.
Where: (1) N = Number of years.
(2) 114 = Rules constant variable.
(3) R = Interest rate.
Rule of 114 Example:
Example of Rule of 144: Mr. Jack read in one of the article that, Inflation rate is growing every year with the average rate of 9% in the country.
Formula says that Divide 114 by 9 (i.e. rate of interest)
As a result, You get notice that, Inflation rate will get tripled in next 12.7 years at same rate of inflation year on year.
Rule of 114 Example: Mr. Patel hire a fund manager to manage his funds with guaranteed 25% returns year on year as a part of the reputed and high net worth client for the investment company.
Formula says that Divide 114 by 25 (i.e. rate of interest)
As a result, Mr. Patel can triple his investment amount in just 4.6 years as a compounding interest.
Rule of 114 Worksheet:
Lets see the rule of 144 worksheet to understand the concept of rule of 114 in much details. Check it out!
Rules | Years | 4% | 6% | 8% | 10% | 12% |
Rule of 72 | Years to Double Investment | 18.00 | 12.00 | 9.00 | 7.20 | 6.00 |
Rule of 114 | Years to Triple Investment | 28.80 | 19.20 | 14.40 | 11.50 | 9.60 |
Rule of 144 | Years to Quadruple Investment | 36.00 | 24.00 | 18.00 | 14.40 | 12.00 |
Rule of 144 Definition:
Rule of 144 means, it is similar to Rule of 114 and Rule of 72 in all ways only thing which makes it unique is that, Rule of 144 will assist you to identify time duration required to quadruple your capital investment evaluated by compounding interest formula. Rule of 144 definition says that divide 144 by interest rate to get the years essential to quadruple your money.
Rule of 144 Formula:
Here Rule of 144 formula offer you to have simple calculation to solve your mathematical problem of quadruple the investment time period.
Rule of 144 Formula: N = 144 / R.
Where: (1) N = Number of many years times.
(2) 144 = Is the constant variable.
(3) R = Rate of interest.
Rule of 144 Example:
Example of Rule of 144: Mr. Daniel read in one of the financial magazine that, country’s GDP is growing with the average rate of 7% every year.
Formula says that Divide 144 by 7 (i.e. rate of interest)
As a result, It will take roughly around 20.6 years to quadruple country’s GDP.
Rule of 144 Example: Mr. Michael repays its education loan at 12% per annum.
Using formula (divide 144 by 12)
As a result, Approximately within 12 years Mr. Michael will repay quadruple amount towards education loan.
Conclusion:
Here we have understand the game of formula and learned rule of 114 meaning, rule of 114 formula, examples of rule of 114, rule of 114 calculator, what is rule of 72 meaning, rule of 72 formula, examples of rule of 72, rule of 72 calculator, Why does the rule of 72 work, rule of 115 meaning, rule of 115 formula, rule of 115 example, what is rule of 144 meaning, rule of 144 formula, rule of 144 calculator, examples of rule of 144, and all about.
- Tutorial Course - Basics of Investing for Beginners -
» e-Learning Chapter 1: What is Investment and its objectives.
» e-Learning Chapter 2: Why is Investment important for Economic growth.
» e-Learning Chapter 3: Ways to Invest your money and make profit.
» e-Learning Chapter 4: What are the Best Investment Opportunities for your Retirement Income.
» e-Learning Chapter 5: What are the Legal Matters you should know before Investing.
» e-Learning Chapter 6: Different Types of Investment Risks Involved in Investing.
» e-Learning Chapter 7: When and How to Invest in Stocks.
» e-Learning Chapter 8: How Positive Attitude can improve your Investing mindset.
» e-Learning Chapter 9: Should you Borrow Money to Invest in Stock Markets or Funds.
» e-Learning Chapter 10: 5 Rules of Thumb: Key points to be consider before making Investments.
» e-Learning Chapter 11: How to Calculate Stock Market Returns, Break Even Point and Basis Point.
» e-Learning Chapter 12: How to Calculate Compound Interest and Simple Interest.
» Currently Reading: Rule of 72, 114 and 144 of Compounding Interest formula.
» e-Learning Chapter 14: What is the Difference between Trading, Investment and Speculation?
» e-Learning Chapter 15: How to become a Smart Investor or a Successful Investor.
» e-Learning Chapter 16: Tutorial Quiz – Basics of Investing for Beginners Module.
Hi there colleagues, nice article and fastidious urging commented here, I am really enjoying by these.