Hence, the Fed entered the crisis with the Federal Funds target rate at 5.25 percent and the discount rate at 6.25 percent.
It has long been against the rules for banks to engage in arbitrage by borrowing at the discount rate and lending in the Fed Funds market at a higher rate.
As a callow bond-trader, fresh out of college, he participated in one of the greatest of them all, in Japan in 1986, when the yield on the ten-year benchmark Japanese government bond fell to 2.5%, the discount rate at the time.
First, as the discount rate is at the lowest level it has been in decades, forest assets are much more competitive with other asset classes.
Given Japan's weakened economy, credit cannot be tightened, but with the discount rate already at a record low 0.5%, there is little scope to loosen either.
Each year's number is discounted back to the present at a discount rate that accounts for the growth of the ten-year Treasury, inflation and equity risk, which stands right now at 8.4%.
It reduced the discount rate, at which banks finding themselves short of cash can, in the spirit of Bagehot, borrow from the central bank, and lengthened the term for which it would lend.
Operating under guidance from the Government Accounting Standards Board, public plans discount future liabilities at a rate equal to their expected return on assets--which, for the 59 plans in our study, was typically close to 8%.
For super-geeks this exceeds the Ramsey Rule at a zero discount rate.
At the heart of Buffett's simple but highly effective strategy is having the discipline to recognize when the market is not properly reflecting the true long-term value of a particular business, which can be calculated by discounting its likely future cash flows at an appropriate discount rate.
But they say even at half that rate both firms are trading at a steep discount to their book value.
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Because the dividends on Laffer Shares would vary depending upon GDP growth rates, the markets would discount the expected cash flows at an equity rate of return, which is considerably higher than the interest rate on government bonds.
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So pessimistic are traders about that currency that the forward is priced at a 9% discount to the spot rate.
The Federal Reserve said Friday it has approved a half-percentage point cut in the discount rate - a dramatic move aimed at calming markets roiled by a widening credit crisis.
Bank of America ( BAC - news - people ) aims its bank- card pitch at employers who buy them in bulk as staff gifts. (BofA declined to comment on whether employers receive a discount rate for buying scads of cards at a time.) There's no dormancy fee with BofA's product, but after nine months the cards become worthless, whatever the remaining balance is.
We expect profits to rise at a slow rate, but the discount rate to also rise.
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The Bank of Japan's cut in its discount rate this week may have been aimed as much at helping the banks through this period as at supporting other central banks' easing.
If you are going to use a discount rate of 6% AND assume the bonds are selling at par, then you MUST assume that the coupon on the bond is also 6%.
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With a current-year price-to-earnings ratio just above 10 and a projected five-year growth rate of 10.8%, Scotts sells at a discount to anticipated growth.
There was also some interest-rate liberalization as Chinese banks are now allowed to lend at a discount of up to 20% below the benchmark, compared with a previous floor of 10%.
The government had already amended the legislation so that firms occupying shops or offices empty for at least a year could still apply for a 50% business rate discount for 12 months.
Say the rate on the Spanish bond was 5% and Corzine was able to purchase at a 10% discount to par (100) or 90% of face value.
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If you assume that the bond is selling at par, has an average coupon of 5.5%, say, and you use a discount rate of 6%, then you are implicitly saying that the bond is actually riskier than the market perceives it to be.
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