Investopedia

Continue to Site »

Bank Discount Rate

Filed Under » , ,
Dictionary Says

Definition of 'Bank Discount Rate'

The interest rate for short-term money-market instruments like commercial paper and Treasury bills. The bank discount rate is based on the instrument's par value and the amount of the discount. The bank discount rate is the required rate of return of a safe investment guaranteed by the bank.

Investopedia Says

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.




Articles Of Interest

  1.

    Beta: Know The Risk

    Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here.

  2. How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.

  3. How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.

  4. Digging Into The Dividend Discount Model

    The DDM is one of the most foundational of financial theories, but it's only as good as its assumptions.

  5. Be Mortgage-Free Faster

    Getting rid of this debt faster has bigger benefits than you might think.

  6. Why You Should Invest In Municipal Bond ETFs

    These versatile instruments have become popular with investors in higher tax brackets and fill a specific niche in the wide selection of fixed-income offerings.

  7. What is a triple tax-free municipal bond?

    At its core, a triple tax-free municipal bond is just like any corporate bond: it is a debt instrument, a loan given to a government authority or municipality in order to help it meet certain ...

  8. Besides a savings account, where is the safest place to keep my money?

    Savings accounts are safe because investors' deposits are guaranteed by the Federal Deposit Insurance Corporation (FDIC) for bank accounts or the National Credit Union Administration (NCUA) for ...

  9. How does TARP affect the economy?

    TARP - or the Troubled Asset Relief Program - is a government program created in response to the subprime mortgage crisis that began in 2007. The original goal of the program was to give the ...

  10. How Interest Rates Affect The Stock Market

    Whether you're buying lunch, a home or a stock, you're influenced by interest rates.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.

  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center