Using the Rule of 72, approximately how many years would it take for an investment to double at an annual rate of 4%?

Using the Rule of 72, approximately how many years would it take for an investment to double at an annual rate of 4%?

• A. 18 years
• B. 12 years
• C. 9 years
• D. 24 years

Answer: (A)

The Rule of 72 is a quick way to estimate how long it takes for an investment to double at a fixed annual rate. You divide 72 by the rate (as a percent). At 4%, 72 ÷ 4 = 18 years, so the investment would roughly double in about 18 years. This is an approximation—the exact calculation with compounding gives t = ln(2)/ln(1.04) ≈ 17.7 years, which is still very close to 18. The other options don’t align with this rule’s rough estimate.

The Rule of 72 is a quick way to estimate how long it takes for an investment to double at a fixed annual rate. You divide 72 by the rate (as a percent). At 4%, 72 ÷ 4 = 18 years, so the investment would roughly double in about 18 years. This is an approximation—the exact calculation with compounding gives t = ln(2)/ln(1.04) ≈ 17.7 years, which is still very close to 18. The other options don’t align with this rule’s rough estimate.