Definition:Compound Interest Table/Discount Factor

Definition

Let $P$ be a principal invested under compound interest with an interest rate $r$ over a number of conversion periods $n$.

The discount factor of $P$ is defined as:

$\paren {1 + r}^{-n}$

This is the amount of principal which will increase to $1$ unit after $n$ conversion periods at interest rate $r$.

Symbol

The symbol for a discount factor accumulated over $n$ conversion periods is $\gamma^n$.

Also see

• Results about discount factors can be found here.

Sources

• 1998: David Nelson: The Penguin Dictionary of Mathematics (2nd ed.) ... (previous) ... (next): interest
• 2008: David Nelson: The Penguin Dictionary of Mathematics (4th ed.) ... (previous) ... (next): interest