Discount rate
1.
The quoted market return for traded instruments quoted at a discount. The market discount rate is quoted based on a percentage of the maturity amount. (This is different from a yield or interest rate, which is conventionally quoted based on a percentage of the starting amount.) In the US this is also known as a 'discount yield'.
2.
Cost of capital. The yield used to calculate discount factors and present values.
3.
The rate used to discount future liabilities of a Defined benefit pension scheme in order to calculate the present value of the liabilities, often for the purpose of comparing them with the market value of the scheme’s assets. Historically it was common to use the blended rate of investment return expected on the actual assets in the scheme, but typically now a market rate is used, such as the government bond or AA corporate bond yield for a fixed income security with a similar duration to that of the underlying liabilities.
4.
In the US, the interest rate that member banks pay the Federal Reserve when the banks use securities as collateral. The discount rate acts as a benchmark for interest rates issued. Other central banks also have similar discount rates.
See also
- CertFMM
- Cost of capital
- Discount
- Discount basis
- Discount instruments
- Discounted cash flow
- Interest rate
- Monetary policy
- Periodic rate
- Yield
