Discounting

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Discounting

Calculating the present value of a future amount. Discounting is opposite to compounding.

Discounting

The act of determining the present value of future cash flows. Because money is subject to inflation and has the ability to earn interest, one dollar today is worth more than one dollar tomorrow. Discounting, then, is the act of determining how much less tomorrow's dollar is worth. For example, a bank may loan a sum of money and schedule repayments at $100 per month for 10 years. The bank may then discount the value of payments and determine exactly how much (in today's dollars) it will have received once the loan is paid off.

discounting

The appraisal method of computing the value of an income-producing property by calculating the present value of anticipated cash flows.

References in periodicals archive ?

Delay Discounting A monetary gains questionnaire was used to assess delay discounting rates for each participant.

A free parameter k was used to indicate the steepness of the discounting curve that corresponded with the geometric midpoint of the ranges (Kaplan, Amlung, Reed, Jarmolowicz, McKerchar, & Lemley, 2016).

The Relationship Between Delay and Social Discounting, and Body Mass Index in University Students

The discounting rate can be calculated by applying the following hyperbolic -decay equation developed by Mazur (1987):

In Equation 1, [V.sub.d] is the present discounted value of a delayed reward (i.e., the indifference point), V is the objective value of the delayed reward, k is an empirically derived constant proportional to the degree of delay discounting (i.e., discounting rate), and d is delay duration.

Understanding addiction as a pathology of temporal horizon

"Unsyndicated Partial Interest Discounting." The Appraisal Journal (July 1997): 267-274.

"A Survey of Appraisers Regarding Factors in Discounting Partial Interests." The Appraisal Journal (October 1993): 603-607.

Revisiting Valuation of Real Estate Partial Interests: Recent Case Studies

Future efforts by standard setters and other policy makers to expand discounting as a measurement technique should meet the described conditions.

Four steps to useful present values

Given this debate, it is somewhat surprising to find that relatively little research has been devoted to studying the direct interaction between delay and probability discounting. Rachlin et al.

The results from the first two studies would seem to suggest that equivalency can be found between the two types of discounting, which would potentially allow for a unified interpretation.

Probability alters delay discounting, but delay does not alter probability discounting

When income and expenses are received and disbursed at the beginning of the particular frequency interval, only BOP discounting would seem to apply.

Selecting the appropriate frequency of discounting

The discounting of "eligible" paper would be the primary policy tool with which to achieve this elasticity.

The establishment and evolution of the Federal Reserve Board: 1913-23

Despite being referred to by different labels, there has been some debate as to whether delay and probability discounting might be one in the same, or at least similar to one another.

Magnitude effects in delay and probability discounting when monetary and medical treatment outcomes are discounted