n to double = 1 / i
i = Discount rate
n = Number of periods to double the investment
The simple interest doubling time formula is used to work out the amount of time (n) it takes to double the value of a lump sum investment allowing for simple interest at a given discount rate (i%).
Simple Interest Doubling Time Formula Example
If an investment of 400 is made at the start of period one and earns at a discount rate of 20%, then the number of periods it takes to double the value of the investment is given by the simple interest doubling time formula as follows:
n to double = 1 / i n to double = 1 / 20% n to double = 5 periods
The calculation of the doubling time can be seen in the table below.
The simple interest calculated at 20% on the investment of 400 is the same each period. At the end of five periods, the investment has doubled to 800, which is the same answer given by the simple interest doubling time formula.
The simple interest doubling time formula is one of many used in time value of money calculations, discover another at the links below.