Using the Rule of 72, what approximate annual rate of return is needed for money to double in 8 years?

• A. 6%
• B. 9%
• C. 12%
• D. 15%

Answer: (B)

To determine the approximate annual rate of return needed for money to double in 8 years using the Rule of 72, you divide 72 by the number of years for the investment to double. In this case, you would take 72 and divide it by 8.

When you perform the calculation, you find:

72 ÷ 8 = 9.

This indicates that an approximate annual rate of return of 9% is required for the investment to double in 8 years. The Rule of 72 is a simple mathematical formula that provides a quick estimate of the effect of compound interest on investment growth, facilitating an understanding of how returns can lead to doubling capital over a set time frame.

Other options present different rates of return which would either take less or more time than 8 years for an investment to double, failing to align with the calculation derived from the Rule of 72.