Rule of 72 Definition

The rule of 72 is a simple mathematical estimate that determines an investment’s approximate doubling time. The rule of 72 is geared toward compounding interest accounts and uses the annual percentage rate. To use the Rule of 72, divide 72 by the annual percentage rate and interpret the result as the approximate number of years it will take the investment to double. For example, to calculate the amount of time it would take for a sum to double in an account with a constant 8% interest, calculate 72/8 = 9, or about 9 years. The rule of 72 provides a basic and easy tool and is most accurate with annual compounding of rates between 6% and 10%; in any event, the result is an approximation or estimate.