Definition: In Federal Reserve terminology, an interest rate charged on eligible lending through the discount window. In valuation, a discount rate instead converts future cash flows to present value.
Example
A bank borrows through an eligible Federal Reserve lending program at the applicable discount-window rate.
Keep the distinction clear
Do not confuse the Fed's discount rate with discount points paid on a mortgage, the federal funds rate, or an investor's capitalization rate.
Related terms
Monetary Policy · Discount Points · Capitalization Rate (Cap Rate)
Keep studying
Primary and Secondary Mortgage Markets: Fannie Mae, Freddie Mac, and Ginnie Mae
References: Federal Reserve: discount window
Pronunciation (US): DIS-kownt RAYT (capitals show stress)
Pronunciation reference: Merriam-Webster
Comments
0 comments
Article is closed for comments.