Periodic discount rate: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Promote borrowing dimension.) |
imported>Doug Williamson (Typo - correct - to /.) |
||
| Line 15: | Line 15: | ||
(End amount - start amount) / End amount | (End amount - start amount) / End amount | ||
= (1.03 - 1) | = (1.03 - 1) / 1.03 | ||
= 0.029126 | = 0.029126 | ||
Revision as of 11:19, 25 October 2015
A cost of borrowing - or rate of return - expressed as:
- The excess of the amount at the end over the amount at the start
- Divided by the amount at the end
Example 1
GBP 1 million is borrowed.
GBP 1.03 million is repayable at the end of the period.
The periodic discount rate (d) is:
(End amount - start amount) / End amount
= (1.03 - 1) / 1.03
= 0.029126
= 2.9126%
Example 2
GBP 0.97 million is borrowed or invested
GBP 1.00 million is repayable at the end of the period.
The periodic discount rate (d) is:
(End amount - start amount) / End amount
= (1.00 - 0.97) / 1.00
= 0.030000
= 3.0000%
