Discount rate

If I lowered the discount rate, if this discount rate is

Annual rate of security

That's the annual interest rate.

And the discount rate is this.

Well, remember, this is an annual rate.

Plus 35 divided by the two year rate but this is an annual rate, so you have to discount it twice divided by 1.05 squared.

The present value would be if you discount this by some discount rate.

You can tweak that discount rate and make a few assumptions in discount rate and pretty much assume anything.

The annual death rate, then, becomes 56 million.

We have agreed on the rate of discount.

We have agreed on the rate of discount.

The discount rate assumption is everything in finance.

Then to discount money in the future to the present, we divide it by 1 plus the discount rate so this is a 5 discount rate.

What happens if I assume a 2 discount rate?

So this is a really, really, crazy annual percentage rate and this was just a simple annual percentage rate where we multiplied it by 26, this isn't the effective annual percentage rate, or the actual mathematically correct one.

The GNP will rise at nearly a 4. 5 annual rate.

So they calculate the percent annual growth rate of the economy.

My annual rate looks a lot more like 125 interest, right?

The quarterly growth of 1.2 means an annual growth rate of 4.8 .

A quarterly growth of 1.2 means an annual growth rate of 4.8 .

So this is essentially kind of an annual interest rate, but if

But right now, for simplification, we're assuming a risk free discount rate.

So the same thing is true when you're doing a discount rate.

Remember, this is the annual interest rate but this is an overnight loan.

The Federal Reserve cut its benchmark discount rate to an 18 year low.

So it benefited the most by decreasing the discount rate, the 1.02 squared.

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35 divided by and it's 2 years out, so we discount by our discount rate twice so it's divided by 1.05 squared.

What is the present value of these if I assume a 2 risk free rate, or a 2 discount rate?

Well, when you lower the interest rate, the terms that are using that discount rate the most, benefit the most.

GNP increased at a seasonally adjusted annual rate of 4.5 in the fourth quarter.

But you can almost justify any present value, by picking the right discount rate.

The Bank of Japan lowered its discount rate by half a percentage point Monday, bringing the key lending rate to 4.5 .

And this discount rate, this is where all of the fudge factor occurs in finance.

And actually the whole topic of, how do you decide on the right discount rate?

But in scenario one, because we used a 5 discount rate for all you could say, I don't want to use fancy words but for all durations out we used a 5 discount rate.

So it almost choice number one was the best when we had a 5 discount rate.

Now at a 2 discount rate, choice number two is all of a sudden the best.

So you want to divide it by, let's say we use 11 as a discount rate.

So we take 110, and we're going to use the two year rate, and discount twice.

But then if the discount rate were to change if we were to change our assumption.

Sir, the annual...

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So the annual death rate adds up to 150,000 sorry, the daily death rate 150,000 people per day, which is a huge number by any standard.