How long does 10% interest take to double?

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How long does 10% interest take to double?

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4 min read Published July 01, 2022

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Remember that this rule of thumb is not a substitute for proper calculations, which typically require a scientific calculator and a good understanding of logarithms. That being said, it is a really handy tool to quickly derive a relatively accurate estimate for how long it takes to double your investments. 

Here’s the “Rule of 72” formula:

Years required to double your investments = 72 / Compound Annual Interest Rate (CAGR)

Simple? For example, the CPF Special Account currently gives 4% in interest per annum. Thus, using the “Rule of 72”, it will take 72/4 = 18 years for our monies to double. The actual number of years is 17.67, which shows the “Rule of 72” is pretty close.

If you are able to achieve a higher rate of return, even by a few percentage points, you will drastically shorten the amount of years required to double your investments. Similarly, if you receive a lower rate of return each year, you may take a much longer time to double your investments.

Here is a table of annual compounded interest rates, and what the “Rule of 72” gives, compared to the actual number of years.

Use the Rule of 72 to estimate how long it will take to double an investment at a given interest rate. Divide 72 by the interest rate to see how long it will take to double your money on an investment.

Alternatively you can calculate what interest rate you need to double your investment within a certain time period. For example if you wanted to double an investment in 5 years, divide 72 by 5 to learn that you'll need to earn 14.4% interest annually on your investment for 5 years: 14.4 × 5 = 72.

The Rule of 72 is a simplified version of the more involved compound interest calculation. It is a useful rule of thumb for estimating the doubling of an investment. This calculator provides both the Rule of 72 estimate as well as the precise answer resulting from the formal compound interest calculation.

Interest RateThe annual nominal interest rate of your investment in percent.Time Period in YearsThe number of years the sum of money will remain invested. You can also input months or any period of time as long as the interest rate you input is compounded at the same frequency.CompoundingThis calculator assumes the frequency of compounding is once per period. It also assumes that accrued interest is compounded over time.

Rule of 72 Formula

The Rule of 72 is a simple way to estimate a compound interest calculation for doubling an investment. The formula is interest rate multiplied by the number of time periods = 72:

R * t = 72

where

  • R = interest rate per period as a percentage
  • t = number of periods

Commonly, periods are years so R is the interest rate per year and t is the number of years. You can calculate the number of years to double your investment at some known interest rate by solving for t: t = 72 ÷ R. You can also calculate the interest rate required to double your money within a known time frame by solving for R: R = 72 ÷ t.

Derivation of the Rule of 72 Formula

The basic compound interest formula is:

A = P(1 + r)t,

where A is the accrued amount, P is the principal investment, r is the interest rate per period in decimal form, and t is the number of periods. If we change this formula to show that the accrued amount is twice the principal investment, P, then we have A = 2P. Rewriting the formula:

2P = P(1 + r)t , and dividing by P on both sides gives us

(1 + r)t = 2

We can solve this equation for t by taking the natural log, ln(), of both sides,

\( t \times ln(1+r)=ln(2) \)

and isolating t on the left:

\( t = \dfrac{ln(2)}{ln(1+r)} \)

We can rewrite this to an equivalent form:

\( t = \dfrac{ln(2)}{r}\times\dfrac{r}{ln(1+r)} \)

Solving ln(2) = 0.69 rounded to 2 decimal places and solving the second term for 8% (r=0.08):*

\( t = \dfrac{0.69}{r}\times\dfrac{0.08}{ln(1.08)}=\dfrac{0.69}{r}(1.0395) \)

Solving this equation for r times t:

\( rt=0.69\times1.0395\approx0.72 \)

Finally, multiply both sides by 100 to put the decimal rate r into the percentage rate R:

R*t = 72

*8% is used as a common average and makes this formula most accurate for interest rates from 6% to 10%.

Example Calculations in Years

If you invest a sum of money at 6% interest per year, how long will it take you to double your investment?

t=72/R = 72/6 = 12 years

What interest rate do you need to double your money in 10 years?

R = 72/t = 72/10 = 7.2%

Example Calculation in Months

If you invest a sum of money at 0.5% interest per month, how long will it take you to double your investment?

t=72/R = 72/0.5 = 144 months (since R is a monthly rate the answer is in months rather than years)

144 months = 144 months / 12 months per years = 12 years

References

Vaaler, Leslie Jane Federer; Daniel, James W. Mathematical Interest Theory (Second Edition), Washington DC: The Mathematical Association of America, 2009, page 75.

How many years would it take your money to double a at 10% interest compounded yearly?

Answer and Explanation: The calculated value of the number of years required for invested amount to become double in amount is 7.27 years.

What interest rate will double in 10 years?

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.