The rule of 72 is a method of calculating the time it would take for an investment to double. To use the rule of 72, you would simply divide 72 by the interest rate, to arrive at the amount of time it would take an investment to double.
Example: If you were thinking of investing $10,000 in a bond that pays 8% interest per year, you would use the rule of 72 as follows.
72/8 = 9
Which means your $10,000 investment would double to $20,000 in 9 years. The rule of 72 assumes that you compound the interest you get. So in this case, we are assuming the 8% interest is put back into the same investment or a similar investment that yields an 8% return.
You may also use the rule of 72 to calculate what interest rate you need in order to double a investment in a given amount of time.
Example: if you wanted to double your money every 6 years you would divide 72 by 6.
This means that you must earn a 12% interest rate annually in order to achieve this.
In summary, the rule of 72 is a convenient tool to calculate both the interest and time required in order for a given investment to double in value, assuming the returns are compounded.