Question

Difference between discount rate and interest rate in bonds

Answer 1

Discount rate : The discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window. The discount rate also refers to the interest rate used in discounted cash flow analysis to determine the present value of future cash flows.


Interest rate : An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed (called the principal sum). ... It is defined as the proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an annual percentage