The Doubling Time Calculator is a useful tool for investors and financial analysts to determine how long it will take for an investment to double in value, given a fixed annual rate of return.
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Data Source and Methodology
All calculations are based on the Rule of 72, a simple rule of thumb for estimating the doubling time of an investment.
The Formula Explained
The doubling time is calculated using the formula: Doubling Time = 72 / Annual Rate of Return.
Glossary of Terms
- Annual Rate of Return: The percentage gain or loss on an investment over a year.
- Doubling Time: The time it takes for an investment to grow to twice its size at a constant annual rate of return.
Practical Example
If you have an investment with an annual rate of return of 8%, the doubling time would be calculated as: 72 / 8 = 9 years.
Frequently Asked Questions (FAQ)
What is the Rule of 72?
The Rule of 72 is a simple way to estimate the number of years required to double the invested money at a given annual rate of return.
How accurate is the Rule of 72?
The Rule of 72 is an approximation and is most accurate for rates between 5% and 12%.
Can the Rule of 72 be used for inflation?
Yes, it can be used to estimate how long it will take for the purchasing power of money to halve due to inflation.