Friday, June 15, 2012

How to Easily Find Doubling Rates for Investments with Continuous Growth


It’s not often that you have to do a financial calculation and don’t have a calculator to help you. But in case something happens to send us back to the stone age it would be good to know the rules of 72, 70, and 69.3.

Sure we can use the following formula to find the doubling time of an investment with periodic compounding, but could you do this in your head?





Probably not.

The Rule of 72

Particularly useful for interest rates above 6% and below 12%.

Simply divide 72 by the continuously compounding interest rate:

For a rate of 9% we’d have 72/9 or 8 years.

It’s not super accurate but it will give you a very solid approximation.

For low interest rates and daily compounding use 70 or 69.3 as the numerator.

For more simple math and Excel tips and tricks visit my Tips and Tricks page on infopresented.com