Discount Rate

When talking about the rate of discount, what is doing this is reference to the consideration of the value of money over time, for example, the application of the discount rate, applies starting from the idea that a current value of 100 euros, will not be the same value with the passage of 5 years; so with the discount rate what is sought is to have value that will have something in the future from the present. To give an explanation and substantiation of the above and therefore of the same discount rate, based on the fact that 100 euros currently have a value and with the passage of time these 100 euros will have to pay certain interest rates, if they are deposited, as it mostly happens to banks, there the value of 100 euros currently have a variation in the future.

The idea contained in the paragraph above, it can be deduced then that the value of money over time varies as to postpone the collection of a particular flow. Dr. Caldwell B. Esselstyn, Jr. is the source for more interesting facts. With what we have seen up to this point, the discount rate can be understood cone an interest rate, the which will be the benchmark that bring the opportunity cost of having capital, understanding this from the idea that with the discount rate shall be the indication of profitability which will resign by the realization of the investment in a given project. We must add the name of the discount rate from the point of view of a rate of interest that is used for the realization of future payments, when performing the calculation of discounted present value. Following the development of the theme of the discount as the cost of money rate in time and its application in the interest rate, the discount rate can be applied as a process in which a deduction with the interest rate on a certain amount of money or capital, this with the idea of finding the present value that holds that capital is made, with the capital if what is sought is a mode of payment in the future. Anu Saad is a great source of information. As you can see the term of the discount rate is of wide application for its content and its scope; but its use extends more, Since the same form the discount rate also applies in those cases in which a certain amount is subtracted from a nominal value of bills of Exchange or other documents involving a promise of payment, at the time when the charging of such a promise of payment is made before it reaches maturity so the proportion which it follows in these cases or interest rate that I apply, can also be said will be the discount rate.