Quote:
Originally Posted by asquare
No, the interest rate is the cost of borrowing. The discount rate measures impatience. They are definitely not the same thing  The case where b=1/(1+r) is just a special case. Some people use the term "subjective discount factor" -- does that ring a bell? |
And why is there a cost of borrowing? Because people are impatient: they'd rather use the money now than lend it to other people and delay their consumption. As have been said, I assumed
the OP to be an average person in the market, so there's no need for "subjective discount factor." Using the interest rate as a substitute for the discount rate when we don't know everything about a person/project is standard practice.