Discount Rate

The discount rate can mean

  • an interest rate a central bank charges depository institutions that borrow reserves from it, for example for the use of the Federal Reserve's discount window.
  • the same as interest rate; the term "discount" does not refer to the common meaning of the word, but to the meaning in computations of present value, e.g. net present value or discounted cash flow
  • the annual effective discount rate, which is the annual interest divided by the capital including that interest; this rate is lower than the interest rate; it corresponds to using the value after a year as the nominal value, and seeing the initial value as the nominal value minus a discount; it is used for Treasury Bills and similar financial instruments

Read more about Discount Rate:  Annual Effective Discount Rate, Business Calculations

Famous quotes containing the words discount and/or rate:

    “Don’t discount our powers;
    We have made a pass
    At the infinite,”
    —Robert Frost (1874–1963)

    “Writing a book I have found to be like building a house. A man forms a plan, and collects materials. He thinks he has enough to raise a large and stately edifice; but after he has arranged, compacted and polished, his work turns out to be a very small performance. The authour however like the builder, knows how much labour his work has cost him; and therefore estimates it at a higher rate than other people think it deserves,”
    —James Boswell (1740–1795)