Future Value & the Rule of 72
What money grows to at a given rate; 72 / rate = years to double.
What is Future Value & the Rule of 72?
FV = PV x (1 + r)^n. More frequent compounding produces a slightly higher future value. The Rule of 72 estimates doubling time: divide 72 by the annual rate.
Future Value & the Rule of 72: a worked example
$10,000 at 6% for 12 years: FV = $20,122. The Rule of 72 gives 72 / 6 = 12 years to double - a close match.
More terms in Economics & Financial Reporting
Business Cycle
The recurring pattern of expansion, peak, contraction, and trough.
Leading, Coincident & Lagging Indicators
Data series that move before, with, or after the business cycle.
Deflation vs. Disinflation
Falling prices versus a slowing rate of price increases.
Currency Valuation & Exchange Rates
What one currency buys of another, and who wins when it moves.
Sovereign Debt
Bonds issued by a national government.
Trade Deficit
A country imports more goods and services than it exports.
Income Statement
Revenue, expenses, and profit over a period of time.
Balance Sheet
Assets, liabilities, and equity at a single point in time.