According to the Rule of 72, how can you estimate the number of years required to double an investment at a given annual interest rate?

• A. Add 72 to the annual interest rate.
• B. Divide 72 by the annual interest rate.
• C. Divide the annual interest rate by 72.
• D. Multiply 72 by the annual interest rate.

Answer: (B)

Verified step by step guidance

1. Understand the Rule of 72: It is a simple formula used to estimate the number of years required to double an investment at a given annual interest rate. The formula is: \( \text{Years to double} = \frac{72}{\text{Annual Interest Rate}} \).
2. Identify the annual interest rate (expressed as a percentage) provided in the problem. For example, if the annual interest rate is 6%, use this value in the formula.
3. Substitute the annual interest rate into the formula. For instance, if the interest rate is 6%, the formula becomes \( \text{Years to double} = \frac{72}{6} \).
4. Perform the division operation to calculate the approximate number of years required to double the investment. Note that this step is for understanding the process, and the actual calculation is not performed here.
5. Interpret the result: The output of the formula gives you an estimate of how many years it will take for the investment to double at the specified annual interest rate.