Bank Discount Rate

Definition of 'Bank Discount Rate'

The bank discount rate is the required rate of return of a safe investment guaranteed by the bank.

Investopedia explains 'Bank Discount Rate'

Assume an unsecured obligation (e.g., commercial paper) that matures in one year with a face value of  $1,000 and a purchase price of $970.

($1,000 - $970) = $30 discount
$30/$970 = 3.1% rate of interest

To simplify calculations when determining the bank discount rate, a 360-day year is often used.