Have you always wanted to be able to do compound interest problems in your head? Perhaps not... but it's a very useful skill to have because it gives you a lightning fast benchmark to determine how good (or not so good) a potential investment is likely to be. Show The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.
Compound Interest CurveSuppose you invest $100 at a compound interest rate of 10%. The rule of 72 tells you that your money will double every seven years, approximately:
If you graph these points, you start to see the familiar compound interest curve:
 Practice using the Rule of 72It's good to practice with the rule of 72 to get an intuitive feeling for the way compound interest works. So... Why Stop at a Double?There's nothing sacred about doubling your money. You can also get a simple estimate for other growth factors, as this calculator shows: Why Does the Rule of 72 Work?If you want to know more, see this explanation of why the rule of 72 works. (Brace yourself, because it's slightly geeked out.) Every investor wants to grow his wealth by as much as possible in the shortest period of time. The time span required to double your money would depend on the returns or interest rate earned on your investments. Obviously, higher the interest or return on your investment, faster will your money double. You can very easily find out the time your investments would take to double your money using a DIY formula called 'the rule of 72'. Rule of 72 is a simple formula where you divide the number '72' with the interest rate offered by your investment instrument to get an idea on how soon can you double your money with that particular investment. For an instance, a bank FD offering an interest rate of 5% p.a., will take over 14 years to double your money. The formula is applied as below: Rule of 72 =72/5 = 14.4 years How much returns should your investments generate if you want to double your money? Alternatively, by tweaking the formula a bit, you can find out returns required to double your money in a specific period. Let's find out: If you want to double your money in three years, your investments should earn between 21% to 24% (72/3 years) every year. Similarly, if you want to double your money in five years, your investments will need to grow at around 14.4% per year (72/5). If your goal is to double your invested sum in 10 years, you should invest in a manner to earn around 7% every year. Rule of 72 provides an approximate idea and assumes one time investment. Time to double money under PPF, Sukanya Samriddhi Yojana, KVP, NSC, NPS and mutual funds We have taken the current interest rates or returns offered by these instruments. PPF at an annual interest rate of 7.1% will take around 10 years to double your money assuming the interest rate remains at 7.1% (72/7.1 =10.14). Similarly, Sukanya Samriddhi Yojana will take around 9.4 years to double your money at the current interest rate of 7.6%. KVP will take 10.4 years to double your money at the current interest rate of 6.9%. National Savings Certificates at 6.8% interest rate will take 10.5 years to double your investments. NPS Scheme C, Scheme G of Tier II account are giving on an average 11.5% returns in the one year period. Assuming similar performance, NPS will take 6.2 years to double your investments. Short duration mutual funds and dynamic bond funds at present are giving around 8.5% returns in the last one year. Assuming similar returns, these instruments will take 8.4 years for your investments to double. Debt medium to long duration mutual funds at 8.7% returns p.a, will take 8.3 years to double your investments. Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. More Less In what time the sum will be double at 5% per annum at simple interest?Here we need to double the money so the amount becomes 2P. Therefore, the number of years it will take to double the money at 5% per annum when compounded annually is 12.5 years.
At what interest rate the fund gets doubled in 5 years?Similarly, if you want to double your money in five years, your investments will need to grow at around 14.4% per year (72/5). If your goal is to double your invested sum in 10 years, you should invest in a manner to earn around 7% every year.
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In what time does a money becomes double at simple interest rate of 5% per annum?
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