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)

    ““Terence, this is stupid stuff:
    You eat your victuals fast enough;
    There can’t be much amiss, ‘tis clear,
    To see the rate you drink your beer.”
    —A.E. (Alfred Edward)