What is the rule of 72 primarily used for?

The rule of 72 is a simple mathematical formula used to estimate the time it takes for an investment to double in value, given a fixed annual rate of return. By dividing the number 72 by the annual interest rate (expressed as a whole number), investors can quickly gauge how long it will take for their investments to grow. For example, if an investment has an annual interest rate of 6%, it would take approximately 72 / 6 = 12 years for the investment to double.

This approach provides a straightforward approximation, which is particularly useful for individuals who may not have the means to perform complex calculations related to compound interest. The other options do not accurately reflect the purpose of the rule. For instance, determining risk levels, estimating annual growth, or calculating compound interest over time each involve different formulas and concepts related to investment analysis that are not encompassed by the rule of 72.