Time-dependent discounting
#3

Ahh... I realize that my explanation didn't answer to the first part of your question.

But that part should be clear already from the documentation:

General discount factor for year y:    r(y)=1/(1+d(y)) 

Present value factor for costs occurring in year y, discounted to the beginning of year z: 

DISC(y,z) =u=z to y-1 r(u)

Therefore, you can immediately see the answer to your question "Is an investment made in 2040 discounted for 10 years by 3% and then by 4% until the baseyear or is the discount rate of 3% used for the entire timespan to the baseyear?” The answer is, of course, that the present value factor DISC(y,z) for e.g. costs occurring in y=2040 does indeed include the impact of the 3% rate for 10 (or 9) years, and the impact of the 4% rate for all the preceding years. 

And the answer to your  final question should be equally clear: the  present value factor DISC(2035,z) for investment payments occurring in year 2035 does include the impact of the 3% rate for several years.

Reply


Messages In This Thread
Time-dependent discounting - by Birgit Fais - 31-10-2014, 12:31 PM
Time-dependent discounting - by Antti-L - 31-10-2014, 01:57 PM
Time-dependent discounting - by Antti-L - 01-11-2014, 12:15 PM
Time-dependent discounting - by Birgit Fais - 03-11-2014, 04:14 AM

Forum Jump:


Users browsing this thread: 1 Guest(s)