"Rule of 78s" calculation

Posted on 2013-01-27
Last Modified: 2013-01-31
Does anyone have an example of C# code that does an accurate "Rule of 78s" calculation? I've spent a few hours trying to get this figured out so I can build an amotization table...

I have the table logic built and working. I have spreadsheet values I'm trying to replicate; but I don't understand (and haven't been able to replicate) the fomulas.

Any help here would be greatly appreciated!

Question by:Miles Thornton
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LVL 37

Expert Comment

ID: 38825182
The "rule of 72" says that if you divide the 72 by the percentage rate, it gives the approximate number of years for the investment to double.

Here is a table showing those values

%      72/%      actual value
1      72      2.047099312
2      36      2.039887344
3      24      2.032794106
4      18      2.025816515
5      14.4      2.018951594
6      12      2.012196472
7      10.3      2.005548375
8      9      1.999004627
9      8      1.992562642
10      7.2      1.98621992
20      3.6      1.927757874
30      2.4      1.876999019
50      1.44      1.792963353

So it's actually pretty close.
The formula for the last column (actual value after 72/P years) is V = (1+P/100)^(72/P)
where P is the percent.
LVL 37

Accepted Solution

TommySzalapski earned 500 total points
ID: 38825189
And here's the actual number of years it would take to double compared to the guess
%      72/%      years
1      72      69.66071689
2      36      35.00278878
3      24      23.44977225
4      18      17.67298769
5      14.4      14.20669908
6      12      11.89566105
7      10.3      10.24476835
8      9      9.006468342
9      8      8.043231727
10      7.2      7.272540897
20      3.6      3.801784017
30      2.4      2.641926796
50      1.44      1.709511291

And here's the formula for the actual number of years to double

Note, that if you replace the 2 with 3, it gives the number of years for the investment to triple. Also note that you can use ln or any other base for log since log(x)/log(y) is the same in any base.

Author Closing Comment

by:Miles Thornton
ID: 38840842
Thank you Tommy Szalapski!

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