Discount rate/Definition

(i) The percentage by which the current value of an asset (to a person or to a commercial organisation) exceeds its value in a year's time. For a person, it is equal to that person’s marginal rate of substitution between consumption in the two successive years. For a financial asset it is the ruling risk-free interest rate. For a commercial organisation, it is equal to that organisation’s cost of capital. (ii) The rate at which banks may borrow at their central bank's discount window.