1. Banking: Rate at which a bill of exchange or an accounts receivable is paid (discounted) before its maturity date.
2. Commerce: Rate by which an invoice amount is reduced when a condition is complied with, such as payment on delivery or an order amount that exceeds a certain minimum figure.
3. Investment appraisal: Multiplier that converts anticipated returns from an investment project to their current market value (present value). It is always less than 1, and depends on the cost of capital (current compound interest rate) and the time interval between the investment date and the date when returns start to flow.
Formula: 1 รท (1 + r) ^n where 'r' is the required rate of return (interest rate) and 'n' is the number of years. Also called discount factor or present value factor. See also discounted cash flow.
4. Securities trading: Amount by which the market value of a bond, certificate of deposit, or share (stock) is below its par value.
Use 'discount rate' in a Sentence
Because it was the off-season, the travel agent fully expected to get a discount rate for his clients on airfare, lodging and vehicle rental .
While looking for new tires for my car, I found a Tire shop that offered a steep discount rate for new customers.
Our company has purchased its office supplies from ABC Company for years, but XYZ Company is offering us a discount rate that will save us money.
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