Actuarial assumptions are critical estimates used to calculate the likely costs of pension schemes and life assurance policies, essential for determining contributions and benefits.
A calculation of net present value made under the assumption that the firm, project, or investment is funded entirely by equity. This method uses the equity discount rate.
A mathematical figure showing the present value of an income stream that generates one dollar of income each period for a specified number of periods.
The bill rate, also known as the discount rate, is the rate applied in the discount market at which bills of exchange are purchased at a value less than their face value upon maturity. This rate considers the quality and associated risk of the bill being discounted.
The CAPM is a formula used to determine the expected return on an investment by accounting for both the risk-free rate of return and the risk premium.
Capitalization rate, often abbreviated as cap rate, is a rate of interest or discount rate used to convert a series of future payments into a single present value. In real estate, the rate includes annual capital recovery in addition to interest.
Compound discount is the difference between the value of an amount in the future and its present discounted value. For example, if £100 in five years' time is worth £88 now, the compound discount will be £12.
An interest or cost of capital rate applied to discount factors in discounted cash flow (DCF) appraisals, used in determining the present value of future cash flows.
The Discount Window is a facility provided by the Federal Reserve where banks can borrow money at the discount rate. This facility is meant for financial institutions that are in need of short-term funding to meet reserve requirements.
Discounted Cash Flow (DCF) is a valuation method used to estimate the attractiveness of an investment opportunity. DCF analysis uses future free cash flow projections and discounts them to arrive at a present value estimate, which is then used to evaluate the potential for investment.
The discounted value is the present worth of a future sum of money or stream of cash flows, given a specific rate of discount. It plays a critical role in various financial assessments.
Actions by the Federal Reserve System to decrease the money supply by curtailing the funds banks have available to lend.
An income stream refers to the regular flow of money generated by a business or investment, essential for evaluating financial health and planning future strategies.
Lifetime Value (LTV) is a metric used to forecast the future profitability a customer will bring to a business over the entire duration of their relationship with the company. It is pivotal in making strategic decisions related to marketing, customer acquisition, and retention.
The Lombard Rate refers to the interest rate at which the German central bank, the Bundesbank, lends to German commercial banks, typically ½% above the discount rate. It can also refer to the interest rate charged by a European commercial bank on loans secured by marketable assets.
The present value (PV) of an annuity is the current value of a series of future payments, discounted at a specific interest rate over a specific number of periods. It is a fundamental concept in finance and accounting, allowing individuals and businesses to evaluate the worth of future payments in today's terms.
The present-value factor is an accounting term that represents the multiplier used to determine the present value of a series of future cash flows, considering a specific discount rate.
In appraisal terminology, the recapture rate is the rate of recovery of an investment in a wasting asset. This rate is added to the discount rate to derive a capitalization rate.
The rediscount rate is the interest rate charged to commercial banks and other depository institutions when they borrow funds from the Federal Reserve through its discount window.
Understanding the calculation and implication of WACC in managing a company's capital structure and assessing project feasibility.
