Share This Article:

Economic Definition of discount. Defined.

Offline Version: PDF

Term discount Definition: In financial terms, a bond or similar financial asset that sells below its face value. Discounting is done to equalized the interest rate attached to a bond with comparable interest rates in the economy. For example, a $100,000 bond that pays a fixed 10 percent interest on the face value (that is, $10,000 annually) would be discounted to $83,333 if comparable interest rates were above 12 percent. As such, the $10,000 annual interest payment works out to be 12 percent of a $83,333 price.

 

« direct | discount rate »

Permalink: http://glossary.econguru.com/economic-term/discount

Alphabetical Reference to Over 2,000 Economic Terms