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Discount Rate—Explanation, Definition and Examples

Valutico

More importantly, we’ll dig deeper into how discount rates can influence investment choices and how they’re used to figure out a company’s worth. What is a discount rate? The “discount rate” does two main things. For central banks like the Federal Reserve, it helps control the economy.

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Convertible Arbitrage Hedge Funds: The Perfect Combination of Investment Banking and Sales & Trading?

Brian DeChesare

Traditionally, if someone asked the “ sales & trading vs. investment banking ” question, the response was easy: “Do banking unless you really, really like trading and could not imagine doing anything else.”. Investment Banking: 13%. Credit Investing or Credit Rating Agency: 6%. Mixed IB / S&T Background: 6%.

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Data Update 3: Inflation and its Ripple Effects!

Musings on Markets

Interest Rates and Inflation Inflation and interest rates are intertwined, and when their paths deviate, as they sometimes do, there is always a reckoning. Put simply, no central bank, no matter how powerful, can force market interest rates down, if inflation expectations stay low, or up, if investor are anticipating high inflation.

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In Search of Safe Havens: The Trust Deficit and Risk-free Investments!

Musings on Markets

In every introductory finance class, you begin with the notion of a risk-free investment, and the rate on that investment becomes the base on which you build, to get to expected returns on risky assets and investments. What is a risk free investment? Why does the risk-free rate matter?

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Country Risk: A 2022 Mid-year Update!

Musings on Markets

Country Risk: Currency and Cost of Capital As a final part to this post, to see the shifts in country risk that we have seen in 2022, let’s start with an assessment of risk free rates.

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Data Update 2 for 2022: US Stocks kept winning in 2021, but…

Musings on Markets

In a post at the start of 2021 , I argued that while stocks entered the year at elevated levels, especially on historic metrics (such as PE ratios), they were priced to deliver reasonable returns, relative to very low risk free rates (with the treasury bond rate at 0.93% at the start of 2021).

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Data Update 3 for 2023: Inflation and Interest Rates

Musings on Markets

Returns in 2022 In my first classes in finance, as a student, I was taught that the US treasury rate was a risk free rate, with the logic being that since the US treasury could always print money, it would not default. I will wager that you would have seen rates go up, with or without the Fed.