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.

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.

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.

It's all assumption driven.

This is the difference between the two.

But let's generalize even more.

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

We saw that choice number one was the best.

And this is scenario three.

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

What you have already is a very powerful tool.

In this example that I did in the previous video, it was the pre tax return on asset.

We have agreed on the rate of discount.

Anyway.

We have agreed on the rate of discount.

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.

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

If it's growing 100 a year for 20 years, this is actually a very good deal.

Now what can we do ?

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

So let me switch colors just to ease the monotony.

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

It's just a faster way of saying

700 rads per shot. (Laughter)

So why is that?

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

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.

60 off.

Uh, when I started farming,

The price per share, the market price per share, is 3.50, so you could also say it's trading at a discount to book.

Today, there are 2.3 million.

We could have also done it other way.

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

Now another interesting caveat is a sentence people put a so called discount factor into this equation with an exponent of T, where a discount factor was going to be 0.9, and what this does is it decays future reward relative to more immediate rewards, and it's kind of an alternative way to specify costs.

Because this is what all of our present values and our discounted cash flow, this type of dividing by 1 plus the discount rate to the power of however many years out, this is what all of that's based on.

These are 30 percent off.

Add that together with the gas, and it's 112,000 per year, just for that sign in each direction.

One of the viewers pointed out not incorrectly that one definition of return on asset so this whole video's going to be on return on asset that one definition of return on asset, and if you look it up on some of the finance sites or even some finance textbooks, they'll tell you it's net income over total assets.

This is 2009 estimates.

We could have said Let y equal the discount

5 minus this 2.

Divide CPU usage by number of CPUs