Periodic discount rate: Difference between revisions
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imported>Doug Williamson (Add Example.) |
imported>Doug Williamson (Promote borrowing dimension.) |
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A | A cost of borrowing - or rate of return - expressed as: | ||
*The excess of the amount at the end over the amount at the start | *The excess of the amount at the end over the amount at the start | ||
Revision as of 11:18, 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%
