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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Time Value of Money

Using the Rule of 72, approximately how many years will it take for an investment growing at 9% per annum compounded annually to double?

The investment doubles in about 8 years. The Rule of 72 divides 72 by the annual compounded rate of return, so 72 divided by 9 gives 8 years. It is a quick approximation rather than an exact figure.

  1. A6 years
  2. B8 yearsCorrect
  3. C9 years
  4. D12 years

Explanation

The Rule of 72 estimates doubling time as 72 divided by the annual rate of return. Here 72 / 9 = 8 years. Choosing 12 years would come from wrongly dividing by 6, and 9 years confuses the rate with the time.

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