# Questions tagged [discount-rate]

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### 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
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### 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 ...
99 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 ...
1 vote
19 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 ...
10 views

### How to properly indicate the reference year of NPV that is in the past?

Say we are in the year 2023. I have computed the NPV with Year 0 set in 2019. (Reason: for comparison of actual vs initial projection in 2019 basis period). What is the acceptable norm to quote the ...
1 vote
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### 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 ...
46 views

1 vote
201 views

### Discount & Interest rates

Small question, is discount rates and interest rates the same/similar thing in economics? A bit confused regarding this.
488 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
901 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, ...
340 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 ...
527 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
132 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, ...
109 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. ...
534 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 ...
1 vote
143 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 ...
169 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
61 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)
290 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-...
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, ...