As a result of the power of compound interest, the choice of discount rate used to estimate the potential economic costs of climate change is more important for purposes of understanding the trade-offs associated with competing climate-change policy options than perhaps any other single issue in climate change economics.

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And the cost to the supplier of immediate cash payment by the bank, in respect of the implicit interest rate or discount on the bill, ought to be tiny - because the bank is in effect lending to the safe big company, which ultimately honours the bill, not to the riskier supplier.

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The interest rate allows me to discount the value of some cash payment in the future to the value the principle would hold for me if I had it now.

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There was also some interest-rate liberalization as Chinese banks are now allowed to lend at a discount of up to 20% below the benchmark, compared with a previous floor of 10%.

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Three factors determine the health of any pension fund: asset returns, company contributions and the discount rate, which is used to calculate the present value of pension liabilities and is tied to interest rates.

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Because the dividends on Laffer Shares would vary depending upon GDP growth rates, the markets would discount the expected cash flows at an equity rate of return, which is considerably higher than the interest rate on government bonds.

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If shares change in value, that must reflect a change in investors' assessment of either the prospective dividend flow (for example, because of fears about the future level of profits) or the right discount rate (for example, because of a change in inflationary prospects or in long-term real interest rates), or both.

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