what is the rule of 72 
the rule of 72 is a quick useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return alternatively it can compute the annual rate of compounded return from an investment given how many years it will take to double the investment while calculators and spreadsheet programs like microsoft excel have functions to accurately calculate the precise time required to double the invested money the rule of 72 comes in handy for mental calculations to quickly gauge an approximate value for this reason the rule of 72 is often taught to beginning investors as it is easy to comprehend and calculate the security and exchange commission also cites the rule of 72 in grade level financial literacy resources 1investopedia daniel fishelthe formula for the rule of 72the rule of 72 can be leveraged in two different ways to determine an expected doubling period or required rate of return years to double 72 expected rate of returnto calculate the time period an investment will double divide the integer 72 by the expected rate of return the formula relies on a single average rate over the life of the investment the findings hold true for fractional results as all decimals represent an additional portion of a year expected rate of return 72 years to doubleto calculate the expected rate of interest divide the integer 72 by the number of years required to double your investment the number of years does not need to be a whole number the formula can handle fractions or portions of a year in addition the resulting expected rate of return assumes compounding interest at that rate over the entire holding period of an investment the rule of 72 applies to cases of compound interest not simple interest simple interest is determined by multiplying the daily interest rate by the principal amount and by the number of days that elapse between payments compound interest is calculated on both the initial principal and the accumulated interest of previous periods of a deposit 