discount rate
The "discount rate" is a crucial concept in both central banking and investment, influencing monetary policy and financial analysis.
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Definition
C1Central Banking
(technical, economic)The interest rate a central bank charges commercial banks for short-term loans.
Example
- The Federal Reserve raised the discount rate to control inflation.
- Commercial banks borrow funds from the central bank at the discount rate.
C1Investment Analysis
(technical, financial)The rate used to calculate the present value of future cash flows in financial models.
Example
- Investors use a higher discount rate for riskier projects.
- The present value of the investment was determined using a discount rate of 5%.
Similar
Terms that have similar or relatively close meanings to "discount rate":