IRR Quadruple Your Money: According to the given rule, what is the approximate IRR to quadruple money in N years?

IRR Quadruple Your Money: According to the given rule, what is the approximate IRR to quadruple money in N years?

• A. 165% / N
• B. 300% / N
• C. 55% / N
• D. 100% / N

Answer: (A)

To quadruple your money in N years, you’re after the annual IRR r that makes the value grow by a factor of 4 over N years, so (1 + r)^N ≈ 4. The exact solution is r = 4^(1/N) - 1, but a common quick rule of thumb used in practice is that the annual IRR is about 165% divided by N. So the approximate IRR is 165%/N. Why this fits: dividing the target total return of 4x across N years gives a reasonable, simple way to estimate the required per-year return without a calculator. For example, with three years, 165%/N gives about 55% per year; compounding 1.55 over three years gets close to 4 (1.55)^3 ≈ 3.72. For four years, about 41% per year yields (1.41)^4 ≈ 3.98, close to 4. This shows the rule captures the idea that the needed IRR scales roughly inversely with the time horizon. So the option stating 165% divided by N is the best match to this rule. If you wanted the exact value, use r = 4^(1/N) - 1.

To quadruple your money in N years, you’re after the annual IRR r that makes the value grow by a factor of 4 over N years, so (1 + r)^N ≈ 4. The exact solution is r = 4^(1/N) - 1, but a common quick rule of thumb used in practice is that the annual IRR is about 165% divided by N. So the approximate IRR is 165%/N.

Why this fits: dividing the target total return of 4x across N years gives a reasonable, simple way to estimate the required per-year return without a calculator. For example, with three years, 165%/N gives about 55% per year; compounding 1.55 over three years gets close to 4 (1.55)^3 ≈ 3.72. For four years, about 41% per year yields (1.41)^4 ≈ 3.98, close to 4. This shows the rule captures the idea that the needed IRR scales roughly inversely with the time horizon.

So the option stating 165% divided by N is the best match to this rule. If you wanted the exact value, use r = 4^(1/N) - 1.