Discount basis and Prime number: Difference between pages

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This term can refer either to the cash flows of an instrument (Discount instruments) or to its basis of market quotation (Discount rate).
''Maths - encryption''.


A prime number is a positive whole number that is divisible only by itself and 1.


'''Example'''
Some encryption systems make use of very large prime numbers, for example RSA encryption.


An instrument is quoted - on a <u>discount basis</u>, one period before its maturity - at a discount of 10% per period.


This means that it is currently trading at a price of 100% LESS 10% = 90% of its terminal value.
Examples of small prime numbers include 2, 3, 5, 7 and 11.


(The periodic ''yield'' on this instrument is 10% / 90% = 11.11%.  So if the same instrument had been quoted on a <u>yield basis</u>, then the quoted yield per period = 11.11%.)
The relationship between the periodic discount rate (d) and the periodic yield (r) is:
r = d / ( 1 - d )
So in this case:
r = 0.10 / ( 1 - 0.10 = 0.90 )
= 11.11%


== See also ==
* [[Encryption]]
* [[Factors]]
* [[RSA encryption]]


== See also ==
[[Category:The_business_context]]
* [[Discount instruments]]
[[Category:Manage_risks]]
* [[Discount rate]]
[[Category:Technology]]
* [[Sterling commercial paper]]
* [[US commercial paper]]
* [[Yield basis]]
* [[Effective annual rate]]
* [[Nominal annual rate]]
* [[Periodic yield]]

Revision as of 15:54, 18 December 2019

Maths - encryption.

A prime number is a positive whole number that is divisible only by itself and 1.

Some encryption systems make use of very large prime numbers, for example RSA encryption.


Examples of small prime numbers include 2, 3, 5, 7 and 11.


See also