# Dictionary Definition

discount

### Noun

1 the act of reducing the selling price of
merchandise [syn: price
reduction, deduction]

2 interest on an annual basis deducted in advance
on a loan [syn: discount
rate, bank
discount]

3 a refund of some fraction of the amount paid
[syn: rebate]

4 an amount or percentage deducted [syn: deduction]

### Verb

1 bar from attention or consideration; "She
dismissed his advances" [syn: dismiss, disregard, brush aside,
brush
off, push aside,
ignore]

2 give a reduction in price on; "I never discount
these books-they sell like hot cakes"

# User Contributed Dictionary

## English

### Pronunciation

- Verb:
- (in some senses) dĭskount', /dɪsˈkaʊnt/, /dIs"kaUnt/
- (in some senses) dĭs'kount, /ˈdɪskaʊnt/, /"dIskaUnt/

- Noun and adjective:
- dĭs'kount, /ˈdɪskaʊnt/, /"dIskaUnt/

- Rhymes: -aʊnt

### Etymology

Alteration of décompte.### Verb

- To deduct from an account, debt, charge, and the like; to make an abatement of; as, merchants sometimes discount five or six per cent for prompt payment of bills.
- To lend money upon, deducting the discount or allowance for interest; as, the banks discount notes and bills of exchange.
- To take into consideration beforehand; to anticipate and form conclusions concerning (an event).
- To leave out of account; to take no notice of.
- To lend, or make a practice of lending, money, abating the discount; as, the discount for sixty or ninety days.

### Noun

- A reduction in price.

- A deduction made for interest, in advancing money upon, or purchasing, a bill or note not due; payment in advance of interest upon money.
- The rate of interest charged in discounting.

#### Antonyms

#### Derived terms

#### Translations

reduction in price

deduction made for interest

rate of interest charged in discounting

### Adjective

- Of goods, available at reduced prices; discounted.
- This store specializes in discount wares.

- Of a store, specializing in goods at reduced prices.
- If you're looking for cheap clothes, there's a discount clothier around the corner.

# Extensive Definition

In finance and economics, discounting is the
process of finding the present value of an amount of cash at some
future date, and along with compounding cash forms the basis of
time
value of money calculations. The discounted value of a cash flow is
determined by reducing its value by the appropriate discount
rate for each unit of time between the time when the cashflow
is to be valued to the time of the cash flow. Most often the
discount rate is expressed as an annual rate.

## Example

To calculate the present value of a single cash flow, it is divided by one plus the interest rate for each period of time that will pass. This is expressed mathematically as raising the divisor to the power of the number of units of time.Consider the task to find the present
value PV of $100 that will be received in five years. The
question is what the present value of this future transaction is.
Or equivalently, which amount of money will grow to $100 in five
years when subject to a constant discount rate?

Assuming a 12% per year interest rate it follows

- =\frac=56.74 $.

## Discount rate

The discount rate which is used in financial calculations is usually chosen to be equal to the cost of capital. Some adjustment may be made to the discount rate to take account of risks associated with uncertain cashflows, with other developments.The discount rates typically applied to different
types of companies show significant differences:

- Startups seeking money: 50 – 100 %
- Early Startups: 40 – 60 %
- Late Startups: 30 – 50%
- Mature Companies: 10 – 25%

Reason for high discount rates for
startups:

- Reduced marketability of ownerships because stocks are not traded publicly
- Limited number of investors willing to invest
- Startups face high risks
- Over optimistic forecasts by enthusiastic founders.

One method that looks into a correct discount
rate is the
capital asset pricing model. This model takes in account three
variables that make up the discount rate:

1. Risk Free Rate: The percentage of return
generated by investing in risk free securities such as government
bonds.

2. Beta: The measurement of how a company’s stock
price reacts to a change in the market. A beta higher than 1 means
that a change in share price is exaggerated compared to the rest of
shares in the same market. A beta less than 1 means that the share
is stable and not very responsive to changes in the market. Less
than 0 means that a share is moving in the opposite of the market
change.

3. Equity Market Risk Premium: The return on
investment that investors require above the risk free rate.

Discount rate= risk free rate + beta*(equity
market risk premium)

## Discount factor

The discount factor, P(T), is the number which a future cash flow, to be received at time T, must be multiplied by in order to obtain the current present value. Thus for a fixed annually compounded discount rate we have- P(T) = \frac

For fixed continuously compounded discount rate
we have

- P(T) = e^ \,

## Other discounts

For discounts in marketing, see discounts and allowances, sales promotion, and pricing.## External links

## See also

### Lists

discount in German: Abzinsung

discount in Spanish: Descuento

discount in French: Actualisation

discount in Dutch: rente

discount in Italian: sconto

discount in Japanese: 割引

discount in Chinese: 贴现

discount in Polish: Dyskonto

discount in Russian: Дисконтирование

discount in Finnish: Diskonttaus

discount in Swedish: Diskontera

discount in Vietnamese: Chiết khấu

discount in Ukrainian: Дискаунт

# Synonyms, Antonyms and Related Words

abate,
abatement, abjure, abuse, admit, admit exceptions, allow, allow for, allowance, bate, belittle, blink at, borrow, brush aside, brush off,
charge off, chuck, chuck
out, concede, consider, consider the
circumstances, consider the source, contemn, contradict, cut, decline, deduct, deduction, deny, depreciate, derogate, despise, detract from, diminish, disapprove, discard, disclaim, discount notes,
disdain, dismiss, disown, disparage, dispraise, disregard, draw back, except, exclude, fail, forget, forswear, gloss over, grant, ignore, kick back, knock off,
lend, lessen, lift temporarily,
lower, make allowance,
make allowance for, mark down, minimize, omit, overlook, overpass, pass by, pass over,
pass up, provide for, push aside, rebate, rebuff, recant, reduce, reduction, refund, refuse, refuse to consider,
reject, relax, relax the condition,
renounce, repel, repudiate, repulse, scout, set aside, shave, shove away, slight, spurn, subtract, subtraction, take, take a premium, take account
of, take away, take into account, take into consideration, take
off, take out, throw away, throw out, turn away, turn out, waive, write off