What does the "Rule of 72" help calculate?

The "Rule of 72" is a simple formula used in finance to estimate the number of years required to double the investment value at a fixed annual rate of return. By dividing the number 72 by the annual interest rate expressed as a percentage, investors can quickly assess how long it will take for their investment to grow. For instance, if the expected rate of return is 6%, dividing 72 by 6 suggests it will take about 12 years for the investment to double. This rule provides a useful and straightforward way for individuals to gauge the growth potential of their investments without complex calculations.

The other options focus on unrelated financial concepts. For instance, the rate of inflation concerns the increase in prices over time, while the average return on investment pertains to the overall performance of an investment relative to its cost. The break-even point, on the other hand, refers to the point at which total revenues equal total costs, which is crucial for business analysis but not related to investment doubling times.