Definition of Rule of 72

Rule of 72

This is a very important rule to know. The rule is that the number 72 divided by the rate of return of your investment equals the number of years it takes for your investment to double.
For example
* At 1% your money will double in 72 years.
* At 2% your money will double in 36 years.
* At 3% your money will double in 24 years.
* At 4% your money will double in 18 years.
* At 5% your money will double in 14.4 years.
* At 6% your money will double in 12 years.
* At 7% your money will double in 10.3 years.
* At 8% your money will double in 9 years.
* At 9% your money will double in 8 years.
* At 10% your money will double in 7.2 years.

Administrative pricing rules

IRS rules used to allocate income on export sales to a foreign sales corporation.

Basic IRR rule

Accept the project if IRR is greater than the discount rate; reject the project is lower than the
discount rate.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

48-hour rule

The requirement that all pool information, as specified under the PSA Uniform Practices, in a
TBA transaction be communicated by the seller to the buyer before 3 p.m. EST on the business day 48-hours
prior to the agreed upon trade date.

Multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA
(cumulative volume, relative strength, moving average) Trading System of Pruitt and White.

Net present value rule

An investment is worth making if it has a positive NPV. Projects with negative NPVs
should be rejected.

Rule 144a

SEC rule allowing qualified institutional buyers to buy and trade unregistered securities.

Rule 415

rule enacted in 1982 that permits firms to file shelf registration statements.

Tick-test rules

SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors
from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either
1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or
2) if there is no change in the last trade price of the particular stock, the previous trade price must be
higher than the trade price that preceded it (referred to as a zero uptick).

Variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to
satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Feddie Mac pass-through securities, the accepted
variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity.

Monetarist Rule

Proposal that the money supply be increased at a steady rate equal approximately to the real rate of growth of the economy. Contrast with discretionary policy.

Policy Rule

A formula for determining policy. Contrast with discretionary policy.

Rule

See monetarist rule.

Rules-versus-Discretion Debate

Argument about whether policy authorities should be allowed to undertake discretionary policy action as they see fit or should be replaced by robots programmed to set policy by following specific formulas. See discretionary policy, policy rule.

Attribution Rules

Legislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. Interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to this rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you.

Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.