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

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

• A. 130% / N
• B. 200% / N
• C. 65% / N
• D. 100% / N

Answer: (A)

To triple your money in N years, you’re looking for an annual IRR r that compounds to three times your investment. The exact condition is (1 + r)^N = 3, which gives r = 3^(1/N) − 1. A handy rule of thumb used in practice is to approximate the annual IRR as 1.3 divided by N, i.e., 130% per year divided by the time horizon. This captures the idea that the required annual return falls roughly inversely with the number of years: shorter horizons need a higher per-year return, longer horizons need less. Using that quick rule, the approximate IRR is 130%/N, which is why the option with 130% / N is identified as the best choice. The rule aligns reasonably well with the exact calculation, especially for taller timeframes (and it’s a common, calculator-free estimate in practice). For context, the exact figure is 3^(1/N) − 1, which for N = 3 is about 43–44% per year, close to the 130%/N rule’s result.

To triple your money in N years, you’re looking for an annual IRR r that compounds to three times your investment. The exact condition is (1 + r)^N = 3, which gives r = 3^(1/N) − 1. A handy rule of thumb used in practice is to approximate the annual IRR as 1.3 divided by N, i.e., 130% per year divided by the time horizon. This captures the idea that the required annual return falls roughly inversely with the number of years: shorter horizons need a higher per-year return, longer horizons need less.

Using that quick rule, the approximate IRR is 130%/N, which is why the option with 130% / N is identified as the best choice. The rule aligns reasonably well with the exact calculation, especially for taller timeframes (and it’s a common, calculator-free estimate in practice). For context, the exact figure is 3^(1/N) − 1, which for N = 3 is about 43–44% per year, close to the 130%/N rule’s result.