Rule of 72 Worksheet

Rule of 72 Worksheet

Read each question carefully and answer to the best of your ability. Show all your work where applicable. Remember the Rule of 72 is an approximation.

1. The Rule of 72 is a quick way to estimate the number of years it will take for an investment to   at a given annual rate of return.

2. To use the Rule of 72, you divide 72 by the annual rate of   (as a whole number, not a decimal).

3. The Rule of 72 works best for investments with a fixed annual   rate.

1. If an investment earns 8% annual return, approximately how long will it take to double?

2. An investment doubled in approximately 4 years. What was its approximate annual rate of return?

1. You want to double your money in 6 years. According to the Rule of 72, what annual rate of return do you need?

2. An investment offers a 3% annual return. How many years will it take for the investment to double, according to the Rule of 72?

1. The Rule of 72 provides an exact calculation for doubling time.

2. The Rule of 72 is only applicable to investments, not to other growth scenarios like population growth.

1. Explain why the Rule of 72 is a useful tool for financial planning, and describe a scenario where it would be particularly helpful.

2. Compare and contrast the Rule of 72 with precise compound interest calculations. When might using the Rule of 72 be sufficient, and when would a more exact calculation be necessary?