Periodic discount rate: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Typo - correct - to /.) |
imported>Doug Williamson (Rationalise link.) |
||
| Line 41: | Line 41: | ||
==See also== | ==See also== | ||
*[[ | *[[Effective annual rate]] | ||
*[[Discount rate]] | *[[Discount rate]] | ||
*[[Periodic yield]] | *[[Periodic yield]] | ||
*[[Yield]] | *[[Yield]] | ||
Revision as of 12:51, 25 October 2015
A cost of borrowing - or rate of return - expressed as:
- The excess of the amount at the end over the amount at the start
- Divided by the amount at the end
Example 1
GBP 1 million is borrowed.
GBP 1.03 million is repayable at the end of the period.
The periodic discount rate (d) is:
(End amount - start amount) / End amount
= (1.03 - 1) / 1.03
= 0.029126
= 2.9126%
Example 2
GBP 0.97 million is borrowed or invested
GBP 1.00 million is repayable at the end of the period.
The periodic discount rate (d) is:
(End amount - start amount) / End amount
= (1.00 - 0.97) / 1.00
= 0.030000
= 3.0000%
