discount ratediscount rate
- discount (noun)
- the rate at which the Federal Reserve Banks discount or rediscount securities offered by member banks
- The interest rate charged by a central bank on loans to its member banks. A change in the discount rate is usually followed by similar changes in the interest rates charged by banks and money markets.
- The interest rate used in determining the present value of a future payment or series of payments.
(plural discount rates)
- (finance) An interest rate that a central bank charges depository institutions that borrow reserves from it.
- (finance) The interest rate used to discount future cashflows of a financial instrument; the annual interest rate used to decrease the amounts of future cashflows to yield their present value.
discount rate - Investment & Finance Definition
The interest rate charged to commercial banks and other depository institutions on loans they receive from the discount window, the Federal Reserve Bank’s lending facility. Typically, these loans are given only to meet a bank’s short-term need, such as overnight or for the weekend. Banks must use all other sources of funds before applying for a Federal Reserve loan, which is given at below-market rates.