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Rule of 72
Rule of 72
The 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).
Examples
How 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 #1
Create 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 sheets
Add sheet to your file for each of the following cases
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 sheet can be:
duplicated
renamed
deleted
... and more
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