If inflation is expected to be 8 percent, how long will it take for prices to double?

9 years

Explanation:

Since inflation rate increases in a similar way to compound interest, we can use the rule of 72  to estimate the number of years required to double the prices.

The rule of 72 = 72 / inflation (or interest rate) = number of years needed to double the price (or capital)

72 / 8 = 9 years

It will take 9 years for the prices to double. Therefore, the correct answer is 9 years.

You can use rule of 72 to arrive to determine the how long it will take for the prices to double.  

To use the rule of 72, you can divide 72 by the number of years expected to double the price. This can be expressed as:

72 / inflation rate (interest rate)

= 72 / 8

= 9

Rule 72 is a very simple rule that can be used to answer some specific questions such as how long will it take for prices to double, and can as well be a simple tools to make calculate the impact of inflation on investment.

To properly use rule 72, just divide 72 by the annual rate of return (interest rate) and the derived value is the number of years it will take for your money to double.

This rule is a simple strategy that works for inflation. As easy as rule 72 is, it also some disadvantages. You can only use to get the approximate number of years it will take to double money; therefore it should be used to determine specific estimates of future interest.

Thus, it will take 9 years for the price to double.

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