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that has already been taken into account and is built into a stock or market. Straight equity: price lower than
that of the last sale or inside market.
Discount bond
Debt sold for less than its principal value. If a discount bond pays no coupon, it is called a zero coupon
bond.
Discounted basis
Selling something on a discounted basis is to sell below maturity value, so that the difference makes up all
or part of the interest.
Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values.
Discounted dividend model (DDM)
A formula to estimate the intrinsic value of a firm by figuring the present value of all expected future
dividends.
Discounted in/by market
Used in the context of general equities. In/by the market. Unannounced information that is widely
accepted/anticipated, and hence is already taken into account in the pricing of the security/ market (i.e.,
Poor earnings).
Discounted payback period rule
An investment decision rule in which the cash flows are discounted at an interest rate and the payback rule
is applied on these discounted cash flows.
Discount factor
Present value of $1 received at a stated future date.
Discounting
Calculating the present value of a future amount. The process is opposite to compounding.
Discount period
The period during which a customer can deduct the discount from the net amount of the bill when making
payment.
Discount rate
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short
of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a
privilege to be used to meet short-term liquidity needs, and not a device to increase earnings.
Discount securities
Non-interest-bearing money market instruments that are issued at a discount and redeemed at maturity for
full face value, e.g. U.S. Treasury bills.
Discount window
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