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Discounting
DiscountingCalculating the present value of a future amount. Discounting is opposite to compounding. RELATED TERMS-------------------------------------- Value The worth or desirability of something expressed as an amount of money. Future Contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange. Discounting Calculating the present value of a future amount. Discounting is opposite to compounding. Compounding The process of accumulating the time value of money forward in time. SIMILAR TERMS-------------------------------------- Discharge of bankruptcy The termination of bankruptcy proceedings, resulting in cancellation of the debtor's obligations. Discharge of lien An order terminating a lien on property. Disclaimer of opinion An auditor's statement that does not express any opinion regarding the company's financial condition. Disclosure A company's release of all information pertaining to the company's business activity, regardless of how that information may influence investors. Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. Discount 1) General: Information that has already been taken into account and is built into a stock or market. 2) Straight equity: Price lower than that of the last sale or inside market. Discount arbitrage A riskless arbitrage in which a discount option is purchased and an opposite position is taken in the underlying security. Discount bond Debt sold for less than its principal value. If a discount bond pays no coupon, it is called a zero coupon bond. Discount broker An intermediary individual or company who deals in discounts to other companies' products or services. Discount factor Present value of $1 received at a stated future date. Discount interest Interest at a beginning of the loan. Discount payment The difference between the face value and the price paid for a security. 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. Discount securities Non-interest-bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g., US Treasury bills. Discount window Facility provided by the Fed enabling member banks to borrow reserves against collateral in the form of government securities or other acceptable paper. Discount yield The yield or annual interest rate on a security sold to an investor at a discount. Discounted basis To sell a debt instrument 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 Unannounced information that is widely accepted or anticipated, and hence is already taken into account in the pricing of the security-market. Discounted payback The length of time needed to recoup the present value of an investment. Discounted payback period rule An investment decision rule in which cash flows are discounted at an interest rate and then one determines how long it takes for the sum of the discounted cash flows to equal the initial investment. Discounting the news An adjustment of a stock's price as speculators bid the price up or down in anticipation of news about the company, whether good or bad. DISCOVERY Credit Union DISCOVERY is a credit union with head office in WYOMISSING, PA DISCOVERY NICKEL Limited DISCOVERY NICKEL Limited is a large Australian company in the field of materials. Their Australian Stock Exchange (ASX) code is DNL. Discrepancy Any deviation from the conditions stipulated in a letters of credit. Discrepancies void letter of credit protection. Discrete compounding Compounding the time value of money for separate time intervals. Discrete random variable A random variable that can take only a certain specified set of individual possible values. Discrete variable Variable like 1, 2, 3. Bond ratings are examples of discrete classifications. Discretion Freedom given to the floor broker by an investor to use his judgment regarding the execution of an order. Discretion can be limited, as in the case of a limit order that gives the floor broker some distance from the stated limit price to use his judgment in executing the order. Discretionary account Account over which an individual or organization, other than the person in whose name the account is carried, exercises trading authority or control. Discretionary cash flow Cash flow that is available after the funding of all positive net present value (NPV) capital investment projects. Discretionary income The amount of income a consumer has available after purchasing essentials such as food and shelter. Discretionary order A type of buy order or sell order that gives the broker the freedom and power to make the execution at any time and price that is seen fit and reasonable, given the investor's goals. Discretionary proposition A proposal on a proxy card that brokers can cast in favor of management if they have not yet heard from the beneficial holder ten days before the annual meeting. Discretionary reserves Balance sheet accounts representing temporary accumulations of earnings from the current year or the recent past. Discretionary trust 1) In the context of mutual funds, refers to a mutual fund or unit trust whose management decides on the best way to use the assets without restriction to a specific type of security. 2) In the context of trusts, refers to a personal trust in which a trustee has the power of decision as to how much income or principal each beneficiary receives. Discriminate analysis A statistical process that links the probability of default to a specified set of financial ratios. PREVIOUS AND NEXT TERMS-------------------------------------- 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 Unannounced information that is widely accepted or anticipated, and hence is already taken into account in the pricing of the security-market. Discounted payback The length of time needed to recoup the present value of an investment. Discounted payback period rule An investment decision rule in which cash flows are discounted at an interest rate and then one determines how long it takes for the sum of the discounted cash flows to equal the initial investment. Discounting Discounting the news An adjustment of a stock's price as speculators bid the price up or down in anticipation of news about the company, whether good or bad. Discrepancy Any deviation from the conditions stipulated in a letters of credit. Discrepancies void letter of credit protection. Discrete compounding Compounding the time value of money for separate time intervals. Discrete random variable A random variable that can take only a certain specified set of individual possible values. Discrete variable Variable like 1, 2, 3. Bond ratings are examples of discrete classifications. We thank you for using the Financial Dictionary to search for Discounting. If you have a better definition for Discounting than the one presented here, please let us know by making use of the suggest a term option. This definition of Discounting may be disputed by other professionals. Our attempt is to provide easy definitions on Discounting and any other medical topic for the public at large.
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