Final answer:
Using the Rule of 72, it takes roughly 10 years to double your money at a 7.2 percent interest rate by dividing 72 by the interest rate. This formula provides an easy way to estimate the effects of compound interest.
Step-by-step explanation:
Understanding the Rule of 72
To determine how long it takes to double your money at a 7.2 percent interest rate, you can use the Rule of 72. This rule is a simple formula used to estimate the number of years required to double the invested money at a given annual rate of return. By dividing the number 72 by the annual interest rate, you can get an approximation of the doubling time.
In this case, for a 7.2 percent interest rate, you calculate the doubling time as follows: 72 divided by 7.2 equals 10. Therefore, it would take approximately 10 years to double your initial investment with an annual interest rate of 7.2 percent. It's a quick method to calculate the power of compound interest without needing a financial calculator.