What does the rule of 72 help you determine?

The rule of 72 is a simple formula used in financial planning that estimates the number of years required to double the investment at a fixed annual rate of return. By dividing 72 by the interest rate (expressed as a whole number, not a decimal), you can quickly gauge how long it will take for an investment to grow to twice its original amount.

For instance, if you have an interest rate of 6%, you would divide 72 by 6, resulting in 12 years needed to double your investment. This intuitive mathematical approach allows individuals to make quick assessments regarding their investment strategies without complicated calculations. Therefore, this rule serves as a practical tool for understanding the time value of money in a straightforward and memorable way.

The other options involve different financial concepts not directly related to this particular rule, such as calculating total income after deductions or tracking price inflation, which are outside the scope of the rule of 72's intended use.