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 simple interest 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.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.