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Discount rate

• Is the interest rate used for adjusting for the time value of money for Net Present Value, Option Pricing or other Market Models. It can also refer to the rate that the Federal Reserve charges its members.

• Also known as the Capitalization Rate. The interest rate charged by the twelve Federal Reserve Banks for short-term loans made to member banks. This is the rate used in discounting future cash flows.

• The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings.

• In corporate finance this is the rate by which you divide the cash flows to obtain present value. Other names for discount rate would be hurdle rate, market rate of capitalization, and opportunity cost of capital. In banking, this is the rate of interest charged by the Fed to member banks that borrow at the discount window. The discount rate is an add-on interest rate.

 
 

Follow this link for all the terms related to rate.

 
 Embedded terms in definition
 Borrow
Capitalization rate
Capitalization
Capital
Cash flow
Cash
Collateral
Corporate finance
Cost of capital
Discount window
Discounting
Discount
Earnings
Fed
Finance
Future
Hurdle rate
Interest rate
Interest
Its
Liquidity
Market model
Market
Member
Net present value
Net
Opportunity cost of capital
Opportunity cost
Option
Present value
Rate of interest
Reserve
Short
Term loan
Time value of money
Time value
Time
 
 Related Terms
 
Accretion of a discount
Add on rate
Adjustable rate mortgage
Adjustable rate or floating rate preferred share arps
Adjustable rate preferred stock
After tax real rate of return
All current rate method
All equity rate
Amortizing interest rate swap
Annual percentage rate
Annuity rate
Arithmetic average mean rate of return
Auction rate preferred stock
Average rate of return
Average tax rate
Back discount rate
Bank discount basis
Bank rate
Base interest rate
Base rate
Benchmark interest rate
Break even payment rate
Break even tax rate
Broker loan rate
Call money rate
Capitalization rate
Cash discount
Cash discount period
Ccpc rate reduction
Compound annual growth rate
Cost of giving up a cash discount
Coupon rate
Crediting rate
Cross over rate
Crossover rate
Current rate method
Deep discount bond
Discount
Discount basis
Discount bond
Discount broker
Discount factor
Discount house
Discount loans
Discount paper
Discount period
Discount securities
Discount window
Discount window loans
Dividend discount model
Dividend rate
Documented discount notes
Dollar weighted rate of return
Effective annual interest rate
Effective interest rate international context
Effective rate
Effective true annual rate
Equilibrium rate of interest
Exchange rate
Exchange rate mechanism
Exchange rate risk
Exchange rate risk capital budgeting
Federal funds rate
Fixed exchange rate
Fixed rate loan
Fixed rate payer
Floating exchange rate
Floating rate
Floating rate bonds
Floating rate contract
Floating rate loan
Floating rate note
Floating rate payer
Floating rate preferred
Floating rate preferreds
Floor rate
Foreign exchange rate
Forward discount
Forward exchange rate
Forward interest rate
Forward rate
Forward rate agreement
Growth rate
Historical exchange rate
Hurdle rate
Implied repo rate
Incremental internal rate of return
Interest rate
Interest rate agreement
Interest rate buydowns
Interest rate cap
Interest rate ceiling
Interest rate exposure
Interest rate floor
Interest rate on debt
Interest rate parity theorem
Interest rate risk
Interest rate risk management
Interest rate swap
Internal growth rate
Internal rate of return
Internal rate of return approach
Internal rate of return irr
Inverse floating rate note
Lease rate
London interbank offered rate libor
Marginal tax rate
Market capitalization rate
Money rate of return
Mortgage rate
Nominal annual rate
Nominal exchange rate
Nominal interest rate
Nominal interest rate international context
Nominal rate of interest
Original issue discount
Original issue discount debt oid debt
Outright rate
Overnight rate
Pass through coupon rate
Pass through rate
Pibor paris interbank offer rate
Plowback rate
Portfolio internal rate of return
Portfolio turnover rate
Prime rate
Pure discount bond
Rate anticipation swaps
Rate lock
Rate of interest
Rate of return
Rate of return ratios
Rate risk
Rate sensitive assets
Rate sensitive liabilities
Real interest rate
Real rate of interest
Real rate of return
Reference rate
Reinvestment rate
Retention rate
Risk adjusted discount rate
Risk free rate
Riskless rate
Settlement rate
Split rate tax system
Spot exchange rate
Spot interest rate
Spot rate
Spot rate curve
Stated annual interest rate
Stopping curve refunding rate
Sustainable growth rate
Swap interest rate
Swap rate
Theoretical spot rate curve
Time weighted rate of return
Total rate of return
Unemployment rate
Unisex annuity rate
Variable rate cds
Variable rate loan

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