# Questions tagged [discount-rate]

The tag has no usage guidance.

41 questions
Filter by
Sorted by
Tagged with
174 views

### Who bears the burden of a land value tax over the long-term?

EDIT: I’m not sure if “burden” implies I’m talking about incidence on sellers/buyers but I’m not; I’m just asking about who bears the cost of the tax (as in which people - current owners, future ...
• 33
27 views

### discount rates, how to make calculation

Here is a passage from Environmental Economics 8th edition, by Barry C Field, pg 118 "The logic is even more compelling if we consider a future cost. One of the reasons that environmentalists ...
42 views

### Chan Park - Fundamentals of Engineering economics - 1st edition - Chapter 5 - Present value - 5.8

hope I could ask some help around here. I'm working with Chan S Park book Fundamentals of Engineering Economics, 1st edition. I'm in the problem 5.8, page 171. Which states: Your firm is considering ...
135 views

### Why is exponential discounting considered rational?

I have repeatedly heard a claim that only an exponential discounting is the rational one, however I've never seen the proof. Why is it so? Intuitively, we would expect exponential discount since the ...
• 151
97 views

### Differences of two discount factors

In game theory at the undergraduate level, the discount factor is denoted as $\delta \in [0,1]$. On the other hand, in macroeconomics at the graduate level, the notation $e^{-\rho t}$ is used($t$ is ...
26 views

### Partially Sophisticated Quasi-Hyperbolic Discounting Problem

I am trying to follow the bottom method for partially sophisticated hyperbolic discounting... The setup (modified from an earlier problem in the same course) is that a person will get different "...
• 423
1 vote
28 views

### How can I show what a discount factor is a function of in a bargaining model?

I was reading Espinosa and Rhee (1989) and I was wondering how can the impact of exogenous changes on the discount factor can be shown mathematically. For example, if $A$ represents some exogenous ...
1 vote
42 views

### Does discount rate and cost of capital mean the same thing to compute levelised cost of energy (LCOE)?

I came to understand that cost of capital and discount rate are two different parameters, although they are also used ...
• 111
100 views

### The present value of exterminating the human race in 200 years: Can I afford it? Can you?

Exterminating the human race in 200 years ttime: Can I afford it? Can you? Suppose I am writing a paper trying to asses whether some large near-term capital investment with benefits spread out over a ...
• 335
1 vote
21 views

### Short-sightednes and discounting: high or hyperbolic?

For many years I have encountered articles that attribute behavior that strikes their respective authors as irrationally short-sighted to hyperbolic discounting. I understand why such an author might ...
• 335
1 vote
210 views

• 97
53 views

### Comparing rates of return for different assets using $V=Pe^{rT}$

I have been playing with $V=Pe^{rT}$ and have been thinking about how to apply it to situations involving different assets growing at different rates. Suppose I had data for the historic sale prices ...
• 193
54 views

• 215
1 vote
503 views

### Discount & Interest rates

Small question, is discount rates and interest rates the same/similar thing in economics? A bit confused regarding this.
• 23
594 views

### How does the federal funds rate compare to the federal discount rate?

The federal funds rate is the interest rate charged to banks when they borrow from each other overnight in the federal funds market to satisfy their reserve requirements. This rate is influenced by ...
1 vote
1k views

### What is the difference between the discount window and Fed repos?

I'm wondering how the Fed's discount window differs from it's involvement in the repo market. To the best of my knowledge, both are tools used to conduct monetary policy and both are also short-term, ...
• 111
737 views

### discount factor, function, and rate

Consider an exponential discount factor $\delta\in(0,1)$. Similarly, consider an exponential discount $\textit{function}$: $g(t)=\delta^t$. Then, is defining the discount $\textit{rate}$ as below a ...
• 1,231
556 views

### Interpeting equivalent annual cash flows

So i have this question: RainMan Inc. is in the business of producing rain upon request. They must decide between two investment projects; a new airplane for seeding rain clouds or a new weather ...
1 vote
149 views

### Why is there a stochastic discount factor in firms present value?

In a book I am reading, the problem of the firms is described as maximizing current market value of profits. $$\max \sum_{k=0}^\infty \Delta_{t, t+k} \cdot "\text{profits in period k}"$$ So, ...
• 11
150 views

### Yield To Maturity exact meaning

From investopedia: "YTM is the total return anticipated on a bond if the bond is held until it matures" I have also seen this interpretation used in other sources however this seems wrong to me. ...
581 views

### Calculate optimal discount for product bundling

So recently I made some rules with my transaction data. Based on it I can determine which products are profitable to bundle it together. But even though I know e.g. product A→ product B, are there ...
• 21
1 vote
153 views

### Rationale for discounting

I am interested in understanding the rationale behind discounting in the context of government policy appraisal. As far as I understand it, there are three main components to the discount values ...
• 366
182 views

### Why would a rise in the discount rate stop foreign gold drain and make banks fail?

I am reading "Capitalism and Freedom" by Milton Friedman. In Chapter 3, "The control of Money", Dr. Friedman explains how the Fed exacerbated the Great Depression of the 1930s. In particular: In ...
1 vote
64 views

### Is there any investment model with time-varying depreciation rate?

Is there investment model with different depreciation rate. For example, d1(depreciation rate in 1 period), d2(depreciation rate in 2 period)
292 views

### International Capital Asset Pricing Model (CAPM)

I wanted to value a High-tech start-up of which I have the cash flows of the coming 6 years. I decided to use the Discounted Cash Flow Method. To do so, I calculated the Discount rate. For a High-...
• 41
In the Bellman for the search model, how is the present discounted value of future income equal to $\frac{w}{1-\beta}$? Sounds like a basic question but I just can't comprehend the math in my head, ...