# Questions tagged [discount-rate]

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### Rationale and Methodology for Discounting the Investment in an NPV Calculation

It is clear to me why the benefits accruing from an investment should be discounted. What I wish to understand is what the correct way discount the investment itself is. Assuming zero inflation, ...
136 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 ...
8 views

### Levelized cost of energy - why discount the amount of electricity as well

According to Wikipedia, the levelized cost of electricity is a measure of the average net present cost of electricity generation for a generating plant over its lifetime. According to the formula ...
56 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 ...
278 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 ...
82 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, ...
122 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 ...
68 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. ...
112 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 ...
49 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)
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, ...