Rule of 72The rule of 72 is a method of estimating the number of years that are required to double the amount of and investment at a given compound interest rate.
Compounding Interest is re-investing the interest back into the investment and receiving interest on the re-invested interest amounts in the following time periods (years). ExamplesHow long will is required to double an investment of $1000 invested at 4% compounded annually?
72 ÷ 4 = 18 years
It will take about 18 years to double the investment at an annual compound interest rate of 4%. Exercise #1Create a spreadsheet that demonstrates the rule of 72.
You can follow the above layout - all shaded cells are formulas
- if you change the Amount of Investment or the Yearly Interest Rate the entire spreadsheet will change
- you will need to copy the formulas down for the correct Doubling Time periods
- you do not need to shade the cells
- WARNING:
- The rule of 72 requires the interest rate to be expressed as a percent i.e. 4 for 4%
- The interest Calculations requires the interest rate to be expressed as a decimal value. i.e. 0.04 for 4%
- your formulas must be adjusted accordingly
Exercise #2 - Adding Sheets to a Spreadsheet "Book"Spreadsheet programs, including Google Sheets, allow for one file to hold multiple sheetsAdd sheet to your file for each of the following cases
| Case | Investment | Interest Rate | | 1 | $ 10,000 | 7.2% | | 2 | 5,000 | 6.5% | | 3 | 450 | 2.25% | | 4 | 1,750 | 3.75% | | 5 | 200,000 | 10% |
Note: Copy and Pasting also works between sheets- to add an new sheet, press the big + icon on the bottom RHS of the window
- If you set your sheets up correctly, only the interest rates and investment amounts need to be changed on your sheet
- You will need to adjust the number of rows required to match the doubling time
- some formulas will required absolute cell addressing
Right click on the sheet tab and a s heet can be:- duplicated
- renamed
- deleted
- ... and more
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