What formula helps in calculating the time it takes for an investment to double its principal amount?

The Rule of 72 is a simple mathematical formula that estimates the number of years required to double the investment at a fixed annual rate of return. To use the Rule of 72, you divide 72 by the annual interest rate (expressed as a percentage). For example, if an investment has an annual return of 6%, dividing 72 by 6 gives you 12 years to double your investment. This rule is widely used because it provides a quick mental calculation that can be easily applied to various investment scenarios, making it very practical for investors and finance professionals.

The other options relate to different concepts: the Rule of 70 similarly offers a method for estimating time to double but is less common than the Rule of 72. The Compound Interest Formula calculates the amount of money accumulated over time with interest on the initial principal and accumulated interest but does not provide a straightforward method for estimating the doubling time. The Future Value Formula projects the value of an investment with interest over time but does not focus specifically on the concept of doubling the principal, making the Rule of 72 the most appropriate choice for this particular calculation.