Discount Factor Calculator

How it is calculated

You enter the discount rate per period as a percentage and the number of periods. The tool computes DF = 1 ÷ (1 + r ÷ 100)n, where r is the rate in percent per period and n is the number of periods. It shows the factor to four decimals and the percentage discount, (1 − DF) × 100, which is how much of a future amount's value is lost. The rate and the periods must use the same time unit: an annual rate with years, a monthly rate with months. Periods can be fractional. A rate of −100% or lower gives no result. A negative number of periods is accepted and gives a factor above 1, with a negative discount, as if compounding forward.

Common mistakes

• Entering the rate as a fraction, 0.08, instead of 8. The field is a percentage, so 0.08 would be treated as 0.08% and the factor would be almost 1.
• Using an annual rate with a count of months, or a monthly rate with years. Convert one of them so both refer to the same period.
• Confusing the discount factor with the discount percentage. The factor 0.6806 is what you multiply by; the discount shown, 31.94%, is what is taken off.
• Applying the factor for n periods to a payment that arrives at the start of the first period. That payment is at time 0 and needs a factor of 1.
• Multiplying the rate by the number of periods instead of compounding it. 8% × 5 = 40% overstates the discount compared with 31.94%.