What happens to an investment when applying the Rule of 72 with a 4% interest rate?

The Rule of 72 is a straightforward formula used to estimate the number of years required to double the value of an investment at a fixed annual rate of return. To use the Rule of 72, you simply divide 72 by the annual interest rate.

In this scenario, the interest rate is 4%. Applying the Rule of 72:

72 ÷ 4 = 18

This calculation indicates that it will take approximately 18 years for an investment to double when earning a 4% return annually. Therefore, the choice indicating that it will double in approximately 18 years is correct because it accurately reflects the application of the Rule of 72 to the specified interest rate.

This method provides a quick and effective way to gauge the growth potential of investments without complex calculations, making it a valuable tool for understanding time and interest relationships in finance.