The Rule of 72 is a valuable tool for discovering a simplified way to estimate the time required for money to double in value due to compounding interest. The Rule of 72 states that given a fixed interest rate, it will take 72 divided by that percentage of interest rate to double the original amount of money. This formulation can be applied to any situation that involves exponential growth, such as inflation or GDP growth, as well as fees or taxes on investments.

To illustrate the Rule of 72, let's assume the rate of return of an investment is 8% per year. To calculate how long it will take to double the original amount of money invested, use this equation: 72/8 = 9 years. In other words, it will take 9 years for an investment with a consistent interest rate of 8% to double in value.

The rule is not completely precise however as the real time to double a value can vary depending on the interest rate. For example, a 6% rate of return necessitates 12 years to double an investment, whereas the same rate of return for a longer timeframe such as 10 years promises only a 73.4% doubling rate rather than the 100% that would be expected. Meanwhile, the Rule of 72 isn’t accurate for interest rates that are lower than 6%, or beyond 10%. In these cases, the Rule of 69, Rule of 70 or Rule of 73 is more precise.

Other than being used as a time estimator, the Rule of 72 can also be used as a rate estimator. This means that it can be used to calculate the rate of return needed for an investment to double within a given period of time. For example, if someone wanted to double the value of their investment in 5 years, the equation is 72/5, which equals 14.4%. Therefore, they would need to find an investment with an average rate of return of 14.4% in order to double the money in the given period of time.

Overall, the Rule of 72 provides an easy and accurate estimation of compounding interest rates and is a valuable tool for investors to utilize. Keeping the Rule of 72 in mind when examining investments can help them to predict the long-term effects of their investments as well as a return rate needed in order to reap the desired results. Despite being a general estimation tool, the Rule of 72 is a powerful assessment that can be used to make informed decisions about investments.