- discount rate
- The interest rate charged on loans by the Federal Reserve Bank. Chicago Board of Trade glossary————The interest rate charged by the Federal Reserve to its member banks (banks which belong to the Federal Reserve System) for funds they borrow. This rate has a direct bearing on the interest rates banks charge their customers. When the discount rate is increased, the banks must raise the rates they charge to cover their increased cost of borrowing. Likewise, when the discount rate is lowered, banks are able to charge lower interest rates on their loans. The CENTER ONLINE Futures Glossary————(1) The percentage rate applied to the redemption value of a security in order to calculate a reduced value for a purchaser. Some (or all in the case of zero coupon securities) of the investor's return comes from the resulting price discount.(2) The rate of return for short-term securities for which the investor's entire compensation comes from the discount amount.(3) The rate of interest charged by the Federal Reserve Banks for advances.(4) An interest rate applied to a single cash flow that will not be paid or received until a future time in order to calculate the present value of that future cash flow.(5) An interest rate or a series of interest rates applied to every one of the future cash flows of interest and principal expected from a financial instrument in order to create a single value for that instrument. This single value is equivalent to the sum of the present values for each of the separate cash flows expected from the instrument. When prevailing market rates are used as the discount rate, this technique produces a fair market value that is used as a proxy for market value when the market value of a financial instrument is not readily available.See fair value————The interest rate that the Federal Reserve ( Federal Reserve System) 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 context of NPV or PV calculations, the discount rate is the annual percentage applied. In the context of project financing, the discount rate is often the all-in interest rate ( all-in rate) or the interest rate plus margin. Bloomberg Financial Dictionary————The rate used to calculate the present value of future cash flows. Exchange Handbook Glossary————Rate used to calculate the present value of future cash flows. Financial Services Glossary
* * *
* * *
The interest rate at which a central bank is prepared to lend funds to commercial banks, which supply government debt such as Treasury bills as collateral.► See also Central Bank, Discount.* * *
discount rate UK US noun [C]► FINANCE, BANKING the rate of interest that a country's central bank charges for lending money to other banks: »cut/lower/raise the discount rate
»a cut/reduction/increase in the discount rate
»The central bank slashed its official discount rate, at which it lends to commercial banks, to prevent the economy from sliding into recession.
► FINANCE, ACCOUNTING a rate of interest that you use to calculate the present value of an amount of money that you receive or pay in the future: »In terms of current market prices a 10% discount rate would imply a yield of 10.08% over 30 days.
► (also bill rate) FINANCE the rate by which the price of a bill of exchange is reduced if it is bought before its payment date► COMMERCE a reduced priced that is offered to customers if they buy large quantities of products or services or if they pay a bill by an agreed date
Financial and business terms. 2012.
