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Forward discount |
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Forward discountOpposite of forward premium.Forward discountA currency trades at a forward discount when its forward price is lower than its spot price.Forward discount Similar MatchesDiscountDiscount1. Any reduction in price or value, especially when below a stated or normal price. 2. To buy or sell commercial paper at a price below face value to account for interest to accrue before maturity. Dividend discount modelDividend discount modelA way of valuing a share based on the net present value of the dividends that you expect to receive in the future.The simplest version of the model assumes that the company's dividend rate remains constant. The 'fair' price of the share is the dividend (in pennies per share) divided by the required rate of return. So if you want 10% a year from your shares, the value of a company paying a 7p dividend is 70p. If you think a return of 8% is satisfactory, the value of the same share is 87.5p.A more complex model assumes that the dividends of the company grow at a consistent rate. The fair price to pay is the next dividend divided by the required rate of return minus the rate at which dividends are expected to grow. So if the 7p dividend is expected to grow at 5% per year, an investor requiring an 12% return would value the shares at (7p x 1.05) divided by (0.12 - 0.05)= (7.35p) divided by (0.07)= 105p Straight DiscountStraight DiscountThe rate applied to the face value of the promissory note to calculate present value without compounding. For example, a note with a face value in three years of 100, with a straight discount of 10% per annum has a present value of 70. Discount PointsDiscount PointsThe fee associated with the note rate for your loan, the more discount points you pay the lower the rate you can buy, the fewer you pay, the higher your rate. If the rate is high enough, the loan is priced above par and these premium points are available to pay closing costs creating a no or low fee loan. Documented discount notesDocumented discount notesCommercial paper backed by normal bank lines of credit plus a letter of credit from a bank stating that it will pay off the paper at maturity if the borrower defaults. Such paper is also referred to as L.O.C. paper. Further SuggestionsAccrued market discountDiscounted in or by market Rediscount Discount yield bond discount Average discount rate Deep discount bond Discount window Discount period Discount Interest Discounting Underwriters discount Pure discount bond Dividend Discount Model (DDM) Bank discount basis deep discount Discount securities Risk adjusted discount rate Discount broker Discount period Discounted basis Accrued discount discounted cashflow Discount bond Original Issue Discount securities (OIDS) |
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