How do you apply the 72 rule?

The 72 rule is a simple way to estimate how long it takes for an investment to double in value, based on a fixed annual rate of return. The correct method for applying the rule involves dividing 72 by the annual interest rate expressed as a percentage.

This means that if you take the number 72 and divide it by the interest rate, you will get an approximate number of years required for your investment to double. For example, if the interest rate is 6%, you would calculate 72 divided by 6, which equals 12. This indicates that at a 6% interest rate, it would take roughly 12 years for the investment to double.

Using any other formula would not yield the correct estimation or understanding of the time needed for an investment to double. The other approaches either attempt to manipulate the variables incorrectly or do not use the mathematically established relationship that the rule represents. Therefore, utilizing the division method as stated reflects the essence and utility of the 72 rule effectively.