A discount factor is generally a factor or weight used to reduce the value or amount of an instrument, asset or transaction, etc.

Specifically, in relation to present value calculations, a discount factor is the reciprocal of its equivalent compounding factor, i.e.:

Where:

r = The rate of interest.

n = The number of periods to maturity.

**related terms**

Compounding Factor

Discount

Discount Basis

**related tutorials**

Interest Calculations

Money Market Calculations - Short-Term Instruments

Money Market Calculations - Term Instruments

Time Value of Money