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imported>Doug Williamson |
imported>Doug Williamson |
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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).
| | Internal Rate of Return. |
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| <span style="color:#4B0082">'''Example: Discount basis calculation'''</span>
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| An instrument is quoted - on a <u>discount basis</u>, one period before its maturity - at a discount of 10% per period.
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| This means that it is currently trading at a price of 100% LESS 10% = 90% of its terminal value.
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| (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%.)
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| The relationship between the periodic discount rate (d) and the periodic yield (r) is:
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| r = d / (1 - d)
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| So in this case:
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| r = 0.10 / (1 - 0.10)
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| r = 0.10 / 0.90
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| = 11.11%
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| == See also == | | == See also == |
| * [[Discount instruments]] | | * [[Discounted cash flow]] |
| * [[Discount rate]] | | * [[Internal rate of return]] |
| * [[Sterling commercial paper]] | | * [[Net present value]] |
| * [[US commercial paper]]
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| * [[Yield basis]]
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| * [[Effective annual rate]]
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| * [[Nominal annual rate]]
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| * [[Periodic discount rate]]
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| * [[Periodic yield]]
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Revision as of 18:36, 29 March 2019
Internal Rate of Return.
See also
