Discount rate

The probability of reaching S prime given that we started state S and apply action A.

And it just depended on how the mathematics work out.

Then to discount money in the future to the present, we divide it by 1 plus the discount rate so this is a 5 discount rate.

Another way to kind of just talk about this is to get the present value of 110 a year from now, we discount the value by a discount rate.

If I could get it for 90, that's a good deal for me.

So why is that?

Then we get the Q value of 100 minus the Q value of zero, and the discount rate is 90.

That's really important for now, just for this one quiz.

We saw that choice number one was the best.

This is the difference between the two.

It's all assumption driven.

What you have already is a very powerful tool.

What gets raised? A noun phrase, a vital role to announce here interest rates.

We don't trust America anymore.

We could have also done it other way.

So once again we have verified, by taking the present value of 110 in 2 years to today, that its present value if we assume a 5 discount rate.

Interest rate

We have agreed on the rate of discount.

And this is scenario three.

But you can almost justify any present value, by picking the right discount rate.

But let's generalize even more.

Coupon rate

Market interest rate

Now what can we do ?

To compound the amount of money we invest we multiply the amount we invest times 1 plus the yield.

We have agreed on the rate of discount.

Anyway.

5 minus this 2.

But the big learning from this is how dependent the present value of future payments are on your discount rate assumption.

So this is 8t squared plus I'm just dividing both sides of this equation by 2.

So we can make this explicit by a negative reward per state or we can bring in a discount factor that discounts the plus 100 by the number of steps that it went by before it reached the plus 100.

So you want to divide it by, let's say we use 11 as a discount rate.

Nominal interest rate

Because if it's a year from now, you'd have to discount it by the one year interest rate.

Do you have a student fare?

Well, that was x.

And frankly, what we're learning here is a discounted cash flow.

They had to raise the stated dropout rate as soon as that tracking was done to over 30 percent.

60 off.

Here we grew the money by you could say our yield, a 5 yield, or our interest.

Well the antiderivative of y squared and you have to divide by 3, so it's y cubed over 6.

Are there special evening rates?

So x minus twenty five percent x is equal to the sale price.

So all of this payment was two years out, right?