Future rents should therefore be discounted using real interest rates, not nominal rates.
In accounting terms, future pension liabilities are discounted using a corporate bond yield so that a higher bond weighting reduces the volatility of a scheme's funding ratio.
But future rental income should be discounted using real interest rates not nominal rates, which are low only because inflation is too.
The standard answer is easy: the income must be discounted (using the rate of return on a safe alternative investment) so that it can be measured against the costs.
The Congressional Budget Office reckons that if ExIm's future revenue were discounted using the interest rate paid by the Treasury (the bank's main source of funding), it would make a profit of $14 billion over the next decade.
But even if Reyes's season is discounted using Perry's more aggressive estimate for the extra effort put in by players in their contract years, his numbers still look remarkable.
But the Detroit case shows the dangers of that reasoning.The alternative view, taken by actuaries on this side of the pond and by many economists, is that pensions are a debt-like liability, and thus should be discounted using a bond yield.
The government's accountants define the cost of a student loan as the cash going out minus the projected repayments, the repayments being discounted using a complicated blend of rates on U.S. Treasury securities.
These payouts over their lifetimes are discounted using the (intermediate cost) real interest rate reported by the OASDI Trustees Report of 2.9percenttotobtainin Social Security wealth measures in 2006 and in 2010 (http://www.ssa.gov/oact/tr/TR06/trTOC.html).ssa.gov/oact/tr/TR06/trTOC.html
Since the crisis, the price components are risk-neutral price (discounted using OIS), hedging costs, CVA, bank's profit, FVA (including cost of liquidation buffers), KVA, MVA, and even, for some financial entities, tax valuation adjustment.
In intensive care, pseudothrombocytopenia should be discounted using in vitro agglutination of platelets, by preparing a blood film, or, if necessary, using a blood sample collected in a citrate tube (strong agreement).
