Discount Rate (Noun)
Meaning 1
Interest on an annual basis deducted in advance on a loan.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The bank charges a discount rate of 5% on all personal loans to be repaid within a year.
- To calculate the present value of the loan, the discount rate must be determined.
- A higher discount rate results in a lower present value of the loan amount borrowed.
- When a loan is given at a discount rate, the interest is deducted from the loan amount upfront.
- The discount rate applied to the loan affects the borrower's cash flow in the first year.
Synonyms
Hypernyms
Meaning 2
The rate of interest set by the Federal Reserve that member banks are charged when they borrow money through the Federal Reserve System.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The Federal Reserve lowered the discount rate to stimulate economic growth during the recession.
- Banks that borrow money from the Federal Reserve are charged the discount rate, which can impact their lending decisions.
- The discount rate set by the Federal Reserve is a key tool for implementing monetary policy.
- To combat high inflation, the Federal Reserve raised the discount rate to reduce borrowing and slow down the economy.
- Commercial banks are reluctant to borrow from the Federal Reserve at the higher discount rate, opting instead to rely on other funding sources.