Periodic discount rate

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Revision as of 10:49, 25 October 2015 by imported>Doug Williamson (Add Example.)
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A rate of return - or cost of borrowing - 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%


See also