Discount Factor Formula

correct answer

we need to revalue the fixed leg and floating leg of the swap contract after the interest rates change and compare them in order to find the value for the

computation of discounted payback period

in this context r is called the discount rate or cost of capital and r is called the discount factor

the present value of a fixed leg is given by

notice that the timeline shows n because there are sixmonth or semiannual periods in fiveyears time because the compounding occurs

pv of terminal value

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example using npv

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what growth rate do we use when modelling the constant growth rate is called a stable growth rate while past growth is not always a reliable indicator of

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discount factor formula