discount rate

discount rate
The interest rate charged on loans by the Federal Reserve Bank. Chicago Board of Trade glossary
The interest rate charged by the Federal Reserve to its member banks (banks which belong to the Federal Reserve System) for funds they borrow. This rate has a direct bearing on the interest rates banks charge their customers. When the discount rate is increased, the banks must raise the rates they charge to cover their increased cost of borrowing. Likewise, when the discount rate is lowered, banks are able to charge lower interest rates on their loans. The CENTER ONLINE Futures Glossary
(1) The percentage rate applied to the redemption value of a security in order to calculate a reduced value for a purchaser. Some (or all in the case of zero coupon securities) of the investor's return comes from the resulting price discount.
(2) The rate of return for short-term securities for which the investor's entire compensation comes from the discount amount.
(3) The rate of interest charged by the Federal Reserve Banks for advances.
(4) An interest rate applied to a single cash flow that will not be paid or received until a future time in order to calculate the present value of that future cash flow.
(5) An interest rate or a series of interest rates applied to every one of the future cash flows of interest and principal expected from a financial instrument in order to create a single value for that instrument. This single value is equivalent to the sum of the present values for each of the separate cash flows expected from the instrument. When prevailing market rates are used as the discount rate, this technique produces a fair market value that is used as a proxy for market value when the market value of a financial instrument is not readily available.
The interest rate that the Federal Reserve ( Federal Reserve System) charges a bank to borrow funds when a bank is temporarily short of funds. collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings. In context of NPV or PV calculations, the discount rate is the annual percentage applied. In the context of project financing, the discount rate is often the all-in interest rate ( all-in rate) or the interest rate plus margin. Bloomberg Financial Dictionary
The rate used to calculate the present value of future cash flows. Exchange Handbook Glossary
Rate used to calculate the present value of future cash flows. Financial Services Glossary

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discount rate discount rate rate1

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   The interest rate at which a central bank is prepared to lend funds to commercial banks, which supply government debt such as Treasury bills as collateral.
   ► See also Central Bank, Discount.

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discount rate UK US noun [C]
FINANCE, BANKING the rate of interest that a country's central bank charges for lending money to other banks: »

cut/lower/raise the discount rate


a cut/reduction/increase in the discount rate


The central bank slashed its official discount rate, at which it lends to commercial banks, to prevent the economy from sliding into recession.

FINANCE, ACCOUNTING a rate of interest that you use to calculate the present value of an amount of money that you receive or pay in the future: »

In terms of current market prices a 10% discount rate would imply a yield of 10.08% over 30 days.

(also bill rate) FINANCE the rate by which the price of a bill of exchange is reduced if it is bought before its payment date
COMMERCE a reduced priced that is offered to customers if they buy large quantities of products or services or if they pay a bill by an agreed date

Financial and business terms. 2012.

Look at other dictionaries:

  • discount rate — n 1: the interest on an annual basis deducted in advance on a loan 2: the interest levied by the Federal Reserve for advances and rediscounts Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • discount rate — n. 1. DISCOUNT (n. 3) 2. the rate at which the Federal Reserve Banks discount or rediscount securities offered by member banks …   English World dictionary

  • discount rate — discount .rate n [C usually singular] the interest rate that a country s ↑central bank charges to other banks …   Dictionary of contemporary English

  • discount rate — discount ,rate noun count BUSINESS the rate of interest that The Federal Reserve charges another bank that borrows from it …   Usage of the words and phrases in modern English

  • Discount rate — For the interest rate charged to banks for borrowing short term funds directly from the Federal Reserve, see discount window. For the fees charged to merchants for accepting credit cards, see Discount Rate under Merchant Account. For discount… …   Wikipedia

  • discount rate — Finance. 1. the rate of interest charged in discounting commercial paper. 2. the interest rate charged by Federal Reserve Banks on loans to their member banks, usually against government securities as collateral. 3. the rediscount rate. [1925 30] …   Universalium

  • Discount rate — The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet …   Financial and business terms

  • Discount Rate — 1. The interest rate that an eligible depository institution is charged to borrow short term funds directly from a Federal Reserve Bank. Different types of loans are available from Federal Reserve Banks and each corresponding type of credit has… …   Investment dictionary

  • Discount rate — Taux d escompte NB : À ne pas confondre avec taux d actualisation. Le taux d escompte est un taux d intérêt utilisé sur le marché monétaire, pour les prêts à très court terme (quelques jours). Le terme escompte caractérise la particularité… …   Wikipédia en Français

  • discount rate — 1) The hurdle rate of interest or cost of capital rate applied to the discount factors used in a discounted cash flow appraisal calculation. The discount rate may be based on the cost of capital rate adjusted by a risk factor based on the risk… …   Big dictionary of business and management