Before we talk about the formula 72 or the rule of 72 or the rule of 72, we must know about compound interest. The compound interest rate is the interest added to the principal and then the new amount, including both principal and interest, continues to generate interest, then the new interest is accrued to the old principal, forming a new principal, and then leaving it alone. continued interest.

Understand now, compound interest means that interest overlaps the interest, or we call our Vietnamese style "Interest is mother interest"

So what does this rule of 72 have to do with compound interest?

Equation 72 will help us determine quickly how much of our investment will be doubled, ie 100% return.

The formula for 72 would be to divide 72 by the amount of interest earned each interest period. For example, if you have 100 million VND, you lend to your best friend at an interest rate of 2% per month based on compound interest (not based on the original capital), it will take time for you to collect 100 million interest from 100 million principal (ie your money is doubled) will be 72/2 = 36 (month) (because we loan monthly and the interest rate is 2% per month, the number of periods will be If we lend in an interest rate per year, the number of periods will be the year.) Thus, just after 3 years of lending without drawing interest.

Another example is that you deposit 200 million VND at the bank with an interest rate of 6% a year, the number of years it takes you to duplicate this account is 72/6 = 12 years. Good

In fact, if according to the formula for calculating compound interest, there will be a small difference between the standard formula and the formula 72

There will be a difference if you calculate the math by using formula 72 compared to using the "good" formula to calculate the compound interest. However, the difference is not so significant. However, if you have a large loan or need an exact number, use a good compound interest formula. Equation 72 is only useful for arithmetic.

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