Nominal interest rate. Nominal and real interest rate Nominal interest rate

It is customary to evaluate the interest rate in two projections: nominal and real values.

The nominal interest rate reflects the current position of the asset value. Its main difference from the real rate is its independence from market conditions. The nominal rate in monetary terms reflects the cost of capital, excluding inflationary processes. The real rate, in contrast to the nominal rate, demonstrates the value of the cost of financial resources, taking into account the value of inflation.

Based on the definition of this concept, it can be seen that the nominal interest rate does not take into account changes in price increases and other financial risks. The nominal rate can be taken into account by market participants only as an introductory value.

math effect

The dependence of nominal and real rates has received its mathematical reflection in the Fisher equation. This mathematical model looks like this:

Real rate + Expected inflation rate = Nominal rate

The Fisher effect is mathematically described as follows: The nominal rate changes by the amount at which the real rate remains unchanged.

It is the future rate of inflation that matters in the formation of the market rate, taking into account the maturity of the debt claim, and not the actual rate that was in the past.

Equality of the nominal rate and the real one is possible only in the complete absence of deflation or inflation. This state of affairs is practically unrealistic and is considered in science only in the form of ideal conditions for the functioning of the capital market.

Nominal compound interest rate

Most often, the nominal interest rate is applied when lending. This is due to the dynamic and competitive loan market. The determination of the cost of capital within credit lines is assessed based on the term of the loan, currency and legal features of the borrowing. Banks, trying to minimize their risks, prefer to lend to customers in long-term cooperation in foreign currency, and in short-term cooperation in domestic.

In order to correctly assess the expected income from the use of funds for a long period of time, economists advise taking into account the compound interest scheme. When accruing profit by the compound interest method, at the beginning of each new regulatory period, profit is accrued for the amount received at the end of the previous period.

Any market mechanism in a volatile environment, especially such as the domestic economy, is always associated with high risks. Whether it is a loan agreement or investment in securities, opening a new business or depository cooperation with a bank. Always evaluating the potential profit, it is necessary to pay attention to external factors and the real state of the market. Based only on the nominal yield, you can make the wrong, obviously unprofitable or even potentially disastrous financial decision.

The interest rate is one of the most important macroeconomic indicators. There are many different interest rates in the financial market. First of all, interest rates on deposits and loans differ. For example, at the end of June 2012, the rates on ruble deposits of individuals in Sberbank of Russia were in the range of 0.01-8.75% per annum, and the rates on loans for the purchase of real estate in the same bank were in the range of 11-16.5% per annum. Sberbank's interest rates differ from those of other commercial banks and rates on the interbank lending market. Interest in the banking system as a whole may differ from interest (or similar values, such as annual returns on shares) in other segments of the financial market, such as private or government securities markets. In addition, different degrees of risk of investments in different segments of the financial market can affect the size of rates (higher risk corresponds to a higher percentage). However, the movement of interest rates in various segments of the financial market is explained by similar mechanisms, and in most cases the entire range of interest rates in the country moves in the same direction (if short-term fluctuations are not taken into account). Therefore, in the future, under the interest rate we will understand a certain single, abstract, "average" interest rate.

The importance of the interest rate lies primarily in the fact that it characterizes the cost of using borrowed funds in the financial market. Rising interest rates mean that borrowing in the financial market will become more expensive and less accessible to potential borrowers - for example, firms looking to expand their business and upgrade their equipment, or apartment buyers looking to get a mortgage loan. If rising interest rates force them to abandon investment, this could have far-reaching undesirable consequences for the entire economic system of the country. What can cause interest rates to rise? One of the reasons is the increase in inflation (especially in modern Russia). To describe the relationship between the interest rate and inflation, it is necessary to introduce the concepts of real and nominal interest rates.

The usual interest rate that you can see when you go to a bank or other financial institution is called nominal (g). The nominal rates are the rates on deposits and loans in Sberbank in June 2012 given above. It is interesting that in 1992 in the same bank the interest rate on deposits (in rubles) could reach 190% per annum. Thus, each ruble placed on this deposit at the beginning of 1992 turned into 2 rubles in a year. 90 kopecks (1 ruble of the initial deposit plus 190%). But did the owner of the deposit become richer as a result? Suppose, at the beginning of 1992, for 1 rub. You could buy one loaf of bread. According to official statistics, in 1992 the inflation rate in Russia was approximately 2540%. If bread rose in price at such a rate, then its price increased by 26.4 times over the year (see the mathematical commentary "Growth and Growth Rates") and by the end of the year amounted to 26 rubles. 40 kop. Thus, at the beginning of the year, 1 ruble deposited could buy one loaf of bread. At the end of the year, received in the bank 2 rubles. 90 kop. it was possible to buy only approximately one-tenth of this loaf (to be exact, 2 rubles 90 kopecks: 26 rubles 40 koi "0.11 loaves of bread). Due to the fact that the growth in the size of the deposit in the bank lagged behind the rise in prices, the depositor lost nine-tenths of a loaf of bread, or, in other words, nine-tenths of the purchasing power of his money (to be exact, he lost 89% of their purchasing power, i.e. from one whole loaf at the beginning of the year there were only 0.11 loaves at the end of the year and) The value of -89%, when calculating which the nominal interest rate was adjusted for the inflation rate, is called real interest rate. It is usually denoted by a small letter r . With data on the nominal interest rate i and the inflation rate π, the real interest rate can always be calculated using the Fisher formula:

(here all three values ​​are expressed as a percentage). An example of using Fisher's formula for our 1992 data:

If the inflation rate in a country is low,

a simpler, approximate formula can be used that relates nominal, real interest rates and the inflation rate: For example, if the annual inflation rate π was 1% and the nominal rate i was 3%, the real interest rate was about

Let's return to the previously asked question, slightly modifying it. Why do nominal interest rates change? From the formula we find the nominal rate: . We get the effect called the Fisher effect. In accordance with this effect, two main components of the nominal interest rate are distinguished - real interest and inflation rate and, accordingly, two reasons for its change. Typically, a financial institution (say, a bank), when setting the nominal interest rate for the next year, proceeds from some target value of the real rate and its expectations regarding the future inflation rate. If the target value of the real rate is +2% per annum and the bank's experts expect a 1.5% increase in prices for the next year, then the nominal rate will be set at 3.5% per annum. Please note that in this example, the formation of the nominal interest rate was influenced not by the actual, but by the expected inflation, which can be formalized as , where is the expected inflation rate (e - from English expected).

Thus, the nominal rate is determined by two components - the real rate and the expected rate of inflation. Note that fluctuations in the real interest rate are usually less significant than fluctuations in the expected rate of inflation. In this case, according to the Fisher effect the dynamics of the nominal interest rate is largely determined by the dynamics of the expected inflation rate(Figure 2.13 is offered as an illustration).

In turn, expected inflation is largely determined by the past history of this economic indicator: if inflation was insignificant in the past, it is expected to be insignificant in the future. If the country has previously experienced strong inflation, then this gives rise to pessimistic expectations for the future. If in Russia, until recently, the inflation rate, as a rule, was double-digit, this also had an impact on the average size of interest rates in our country, and the increase in inflation led to an increase in nominal interest rates, and the weakening of inflation somewhat reduced them.

Rice. 2.13.

The interest rate is for 3-month Treasury bills, inflation is calculated as the growth rate of CPI for All Urban Consumers in a given month compared to the same month last year. Sources: according to the US Federal Reserve (federalreserve.gov) and the US Bureau of Labor Statistics (bls.gov).

The percentage is absolute value. For example, if 20,000 is borrowed and the debtor must return 21,000, then the percentage is 21000-20000=1000.

The rate (norm) of loan interest - the price for using money - is a certain percentage of the amount of money. It is determined at the equilibrium point of supply and demand for money.

Very often in economic practice, for convenience, when they talk about loan interest, they mean the interest rate.

Distinguish between nominal and real interest rates. When people talk about interest rates, they mean real interest rates. However, real rates cannot be directly observed. When concluding a loan agreement, we receive information about nominal interest rates.

Nominal rate (i)- quantitative expression of the interest rate, taking into account current prices. The rate at which the loan is issued. The nominal rate is always greater than zero (except for a free loan).

Nominal interest rate is a percentage in terms of money. For example, if for an annual loan of 10,000 den. units, 1200 den. units are paid. as interest, the nominal interest rate will be 12% per annum. Having received an income of 1200 den. units on a loan, will the lender become richer? This will depend on how prices have changed during the year. If annual inflation was 8%, then the real income of the creditor increased by only 4%.

Real rate(r)= nominal rate - inflation rate. The real bank interest rate can be zero or even negative.

Real interest rate is an increase in real wealth, expressed as an increase in the purchasing power of an investor or lender, or the exchange rate at which today's goods and services, real goods, are exchanged for future goods and services. The fact that the market rate of interest will be directly affected by inflationary processes was first suggested by I. Fisher, which determined the nominal interest rate and the expected rate of inflation.

The relationship between rates can be represented by the following expression:

i = r + e, where i is the nominal or market interest rate, r is the real interest rate,

e is the rate of inflation.

Only in special cases, when there is no rise in prices in the money market (e=0), do real and nominal interest rates coincide. The equation shows that the nominal interest rate can change due to changes in the real interest rate or due to changes in inflation. Since the borrower and lender do not know what rate inflation will take, they proceed from the expected rate of inflation. The equation takes the form:

i = r + e e, Where e e expected rate of inflation.

This equation is known as the Fisher effect. Its essence is that the nominal interest rate is determined not by the actual rate of inflation, since it is not known, but by the expected rate of inflation. The dynamics of the nominal interest rate repeats the movement of the expected inflation rate. It should be emphasized that when setting the market rate of interest, it is the expected rate of inflation in the future, taking into account the maturity of the debt obligation, and not the actual rate of inflation in the past that matters.

If unforeseen inflation takes place, then borrowers benefit at the expense of lenders, as they repay the loan with depreciated money. In the event of deflation, the lender will benefit at the expense of the borrower.

Sometimes a situation may arise when real interest rates on loans have a negative value. This can happen if the rate of inflation exceeds the growth rate of the nominal rate. Negative interest rates can set up during periods of runaway inflation or hyperinflation, as well as during periods of economic recession when demand for credit falls and nominal interest rates fall. Positive real interest rates mean an increase in the income of creditors. This happens if inflation reduces the real cost of the loan (credit received).

Interest rates can be fixed or floating.

Fixed interest rate is established for the entire period of use of borrowed funds without the unilateral right to review it.

floating interest rate- this is the rate on medium and long-term loans, which consists of two parts: a movable basis, which changes in accordance with the market conjuncture and a fixed value, usually unchanged throughout the entire period of lending or circulation of debt

The interest rate is the relative amount of interest payments on loan capital for a certain period of time (usually a year). It is calculated as the ratio of the absolute amount of interest payments for the year to the amount of loan capital.

Distinguish between nominal and real interest rates. When people talk about interest rates, they mean real interest rates. However, real rates cannot be directly observed. When concluding a loan agreement, we receive information about nominal interest rates.

The nominal interest rate is the percentage in monetary terms. The real interest rate is the increase in real wealth, expressed as an increase in the purchasing power of an investor or lender, or the exchange rate at which today's goods and services, real goods, are exchanged for future goods and services.

The relationship between rates can be represented by the following expression:

where i is the nominal, or market, interest rate;

r - real interest rate;

p is the rate of inflation.

Only in special cases, when there is no rise in prices in the money market (p=0), do real and nominal interest rates coincide. Equation (2) shows that the nominal interest rate may change due to changes in the real interest rate or due to changes in inflation. Since the borrower and lender do not know what rate inflation will take, they proceed from the expected rate of inflation. The equation takes the form:

where p e is the expected rate of inflation.

Equation (3) is known as the Fisher effect. Its essence is that the nominal interest rate is determined not by the actual rate of inflation, since it is not known, but by the expected rate of inflation. The dynamics of the nominal interest rate repeats the movement of the expected inflation rate. It should be emphasized that it is the expected rate of inflation in the future, taking into account the maturity of the debt obligation, and not the actual rate of inflation in the past that matters when setting the market rate of interest.

If unforeseen inflation takes place, then borrowers benefit at the expense of lenders, as they repay the loan with depreciated money. In the event of deflation, the lender will benefit at the expense of the borrower. If we compare the actual inflation index with the dynamics of the average rate on short-term loans, we can confirm the relationship between the nominal interest rate and the level of inflationary depreciation of money. Sometimes a situation may arise when real interest rates on loans have a negative value. This can happen if the rate of inflation exceeds the growth rate of the nominal rate. Negative interest rates can set up during periods of runaway inflation or hyperinflation, as well as during periods of economic recession when demand for credit falls and nominal interest rates fall. Positive real interest rates mean an increase in the income of creditors. This happens if inflation reduces the real cost of the loan (credit received).

Interest rates can be fixed or floating. A fixed interest rate is set for the entire period of use of borrowed funds without the unilateral right to review it. A floating interest rate is a rate for medium and long-term loans, which consists of two parts: a moving basis, which changes in accordance with market conditions, and a fixed value, usually unchanged throughout the entire period of lending or circulation of debt securities. The interest rate system includes the rates of the monetary and stock markets: rates on bank loans and deposits, treasury, bank and corporate bonds, interbank market interest rates and many others. Their classification is determined by a number of characteristics, including: forms of credit, types of credit institutions, types of investments with a loan, terms of lending, types of operations of a credit institution. loan bank interest rate

The main types of interest rates, which both lenders and borrowers are guided by, include: the base bank rate, the money market interest rate, the interest rate on interbank loans; interest rate on treasury bills.

Consider some types of nominal interest rates.

The base bank rate is the minimum rate set by each bank for loans. Banks provide loans by adding some margin, i.e. premium on the base rate for most retail loans. The base rate includes the bank's operating and administrative expenses and profit. The rate is set independently by each bank. An increase or decrease in the rate of one of the banks will cause similar changes in other banks.

Interest rates on commercial, consumer and mortgage loans. This type of rate is well known both to entrepreneurs who take loans from banks for business development, and to individuals. The actual rate on the loan will be determined as the sum of the base rate and the premium. The premium is a premium for borrower default risk and a maturity risk premium. However, if in commercial lending the value of the interest rate is known to the borrower in advance, then in consumer loans the real effective rate is veiled by various marketing ploys and is burdened with additional deductions: for example, at a declared rate of 20% per annum, the real fee turns out to be much higher, sometimes reaching 80-100% per annum .

Rates on time deposits (deposits) of the population and companies in commercial banks. The vast majority of enterprises, as well as an increasing number of individuals, have accounts in commercial banks, place ruble funds in time deposits (i.e. deposits), receiving interest for this, expressed when concluding a deposit agreement in the form of an interest rate. Deposit rates on passive operations of banks are subject to the influence of the same market processes as rates on active operations. Deposit rates are closely related to other monetary and stock market rates. A legal entity wishing to deposit a certain amount of money can buy bonds on the organized market or promissory notes on the unorganized market. A bank deposit is more convenient in terms of registration, but at the same time, the availability of alternative options for depositing funds means that banks cannot underestimate interest rates on deposits too much.

Rates on debt securities (bonds, certificates of deposit, bills of exchange, commercial paper, notes, etc.) refer to capital market interest rates. In debt securities there is an interest rate at which the borrower - the issuer of the security borrows money. These rates are also very diverse: coupon on multi-year bonds, interest rate on bills and certificates of deposit, yield to maturity. Coupon rates show interest income on the face value of bonds. Yield to maturity shows the interest income, taking into account the market value of the bonds and the reinvestment of the resulting coupon income.

The interest rate on treasury bills is the rate at which Western central banks sell treasury bills on the open market. Treasury bills are discounted securities, i.e. they sell below par, so the rate is treated as a discount yield.

The interest rate on interbank loans refers to money market interest rates. Many media publish lending rates in the interbank market, when one commercial bank lends to another for a certain period in the form of transactions. These interbank lending rates (IBCs) are less known to the general public than bank rates on private deposits. Such rates are the most flexible and are more focused on market conditions.

The reference rate is a necessary infrastructural element of any loan market for operations with interest-bearing instruments. When making a decision to issue or receive a loan, to invest or save funds, any economic individual (both banks and businesses and individuals) needs a base indicator, a generally recognized indicator of the interest rate, which would serve as a guide to the general level of the interest rate in a given currency, with which it would be possible to compare all kinds of rates on various financial instruments and deposit and credit products in the money market. In international practice, interest rate indices, also called reference rates, play the role of a universal beacon of reference among numerous rates. For longer periods of lending money (and this is already the capital market), the role of a general reference point is played by the rate of return on government long-term bonds.

Inflation has a direct impact on the level of interest rates. Getting loans in conditions of inflation is associated with an increasing rate of bank rates, which reflect inflationary expectations. Therefore, a distinction is made between nominal and real interest rates.

The terms "nominal" and "real" are widely used in the economy: nominal and real wages, nominal and real profit (profitability) and always these terms indicate which of the indicators is calculated: not taking into account inflation (nominal) and cleared of inflation (real).

Nominal interest rate- this is the amount of payment in monetary terms for the loan received by the borrower. This is the price of the loan in monetary terms.

Real interest rate- this is the income on a loan, or the price of a loan, expressed in natural meters of goods and services.

The concepts of "nominal" and "real" are applicable to all indicators that are affected by inflation.

To convert the nominal interest rate to the real interest rate, we use the following notation:

i - nominal interest rate;

r is the real interest rate;

f is the inflation rate.

Then i = r + f + r f, (15)

In the control work, it is necessary to calculate what the nominal annual profitability of the enterprise should be so that the real annual profitability is equal to the interest rate indicated in column 3 of Table. Clause 3 at inflation rates per month equal to the value indicated in column 5 of Table P.3.

For example , to ensure the real profit of the enterprise in the amount of 20% per year at an inflation rate of 1.5% per month, it is necessary to achieve a nominal profitability in the amount of:

Rh \u003d 0.196 + 0.2 + 0.196 0.2 \u003d 0.435 \u003d 43.5%.

The annual inflation rate is calculated using the effective interest rate formula (calculation No. 8 of this test).

11. Calculation of investment project performance indicators

This block needs calculate the economic efficiency indicators of two investment projects and compare their results. The amount of investment for two projects is the amount indicated in column 2 of Table. P.3. The interest rate is accepted in accordance with the data in column 3 of Table. Clause 3 (annual interest rate No. 1).

The difference between the projects is only that in the second investment project, the costs are incurred not in one year, as in the first, but in two years (divide the amount of investment in column 2 of Table P.3 by two). At the same time, net income is expected to be received within 5 years in the amounts indicated in column 6 of Table. P.3. In the second investment project, the receipt of annual income is possible from the second year for 5 years.

On fig. 11.1, 11.2 presents a graphical interpretation of these projects.

1Project

Rice. 11.1. Graphic interpretation of the investment project No. 1

2 Project

Rice. 11.2. Graphic interpretation of the investment project No. 2

To assess the effectiveness of an investment project, the following indicators should be calculated:

net present value (NPV);

net capitalized value (EW);

internal rate of return (IRR);

return on investment period (RVR);

profitability index (ARR);

yield index (PI).

The economic efficiency of complex investment projects is assessed using dynamic modeling of real cash flows. With dynamic modeling, the value of inputs and outputs decreases as they move out in time, because investments made earlier will bring more profit. To ensure comparability of current costs and results, their cost is determined at a specific date.

In the practice of assessing the economic efficiency of investments, the cost of current costs and results is usually found at the end or beginning of the billing period. The cost at the end of the billing period is determined by capitalization, the cost at the beginning of the billing period is determined by discounting. Accordingly, two dynamic estimates are formed: the capitalization system and the discounting system. Both dynamic systems require identical preparation of initial information and give an identical assessment of economic efficiency.

The economic effect for the billing period represents the excess of the value of capitalized (discounted) net income over the value of capitalized (discounted) investments for the billing period.

Example , after carrying out activities for the reconstruction of the enterprise, the costs of which amount to 1000 c.u. it became possible to reduce the cost of production by 300 c.u. annually. Trouble-free operation of the equipment is guaranteed for 5 years. Calculate the efficiency of these investments, provided that the interest rate on alternative projects is 15%.

Estimation of economic efficiency in the discounting system

net present value (NPV) is calculated as the difference between discounted income (D d) and discounted investments (I d):

NPV \u003d D d - I d (16)

The solution is presented in Table. 11.1.

Table 11.1 Indicators of investment activity in the discount system

General information is entered in columns 1 and 2 of Table 12. Column 4 contains the discount factor, which is calculated by formula (17).

K d \u003d 1 / (1 + i) t. (17)

t- number of years.

Column 5 shows discounted investments and annual discounted returns. They are found as a line-by-line product of the values ​​of columns 2 and 4. Column 6 "Investor's Financial Position" shows how gradually the discounted net income compensates for the discounted investments. In the zero year, only investments take place and the values ​​of columns 2, 5, and 6 are equal in value. For the year of use of capital, a net income appears. Part of the investment is compensated. The uncompensated part of the investment, found as the algebraic sum of the values ​​of the zero and first years of column 5, is entered in column 6.

The last value of column 6 is the value of the economic effect. He is positive and net present value (NPV) equal to 5.64 c.u. A positive net present value indicates that our project is preferable to alternative capital investments. Investing in this project will bring us additional profit in the amount of 5.64 USD.

In the table, the discounted income does not offset the investment until the fifth year. So over 4 years. Its exact value can be determined by dividing the value of the discounted investment not returned to the owner for 4 years by the value of the discounted income for the fifth year. That is, 4 years + 143.51 / 149.15 = 4.96 years.

The payback period is shorter than the guaranteed life of the equipment; that is, according to this indicator, our project can be assessed positively.

Profitability index (ARR) characterizes the ratio of net present value to the total value of discounted investments, that is:

ARR = NPV / I d (18)

For our example, 5.64 / 1000 = 0.0056 > 0. Investments are considered economically profitable if the profitability index is greater than zero.

Yield index (PI) characterizes the cost of net income for the billing period per unit of investment. In the discounting system, the yield index is determined by the formula:

PI = D d / I d = ARR + 1 (19)

For our project D d = 260.87 + 226.84 + 197.25 + 171.53 + 149.15 = 1005.645, then PI = 1005.64 / 1000 = 1.0056.

The profitability index is greater than the profitability index by one; accordingly, investments are considered cost-effective if the return index is greater than one. This is true for our project as well.

Net capitalized value (ew) represents the excess of the value of capitalized income over the value of capitalized investments for the billing period. Net capitalized value is defined as the difference between capitalized net income (D c) and capitalized investments (I c):

EW \u003d D to - I to (20)

A positive net capitalized value indicates the cost-effectiveness of the investment. The capitalization ratio is determined by the formula (21):

Kk \u003d (1 + i) t. (2)

We will issue the solution of the proposed problem in the form of a table. 11.2.

Table 11.2 Indicators of investment activity in the capitalization system

The net capitalized value of the investment (EW) is CU11.35. To check, we recalculate it into an economic effect under the discounting system. For this you need:

Or multiply the value of the effect in the discounting system by the capitalization coefficient for the 5th year (bring to the final point in time) 5.64 · 2.0113 = = 11.34 USD;

Or multiply the value of the effect in the capitalization system by the discount factor for the 5th year (bring the effect to the zero point in time) 11.35 × × 0.4972 = 5.64 c.u.

The error of both calculations is small, which is explained by the rounding of values ​​in the calculations.

For the fifth year, it remains to return 288.65 c.u. capitalized investments. Hence, return on investment period (RVR) will be:

4 years + 288.65 / 300 = 4.96 years.

Note that the return periods in the system of capitalization and discounting coincide.

Profitability index (ARR) shows the value of net cash received for the billing period per unit of investment. For our example, the profitability index is: ARR \u003d EW / I k \u003d 11.35 / 2011.36 \u003d 0.0056\u003e 0.

Yield indexPI in the capitalization system is determined similarly to the discounting system. PI \u003d D c ​​/ I c \u003d 2022.71 / 2011.36 \u003d 1.0056\u003e 1. Investments are economically justified.

To determine internal rate of return (IRR) For an owner's investment, find the interest rate at which the net present value and net capitalized value are zero. To do this, you need to change the interest rate by 1-2%. If the effect takes place (NPV and EW > 0), it is necessary to raise the interest rate. Otherwise (NPV and EW< 0) необходимо понизить процентную ставку.

For this example, a 1% interest rate increase led to losses estimated in the discount system NPV = - 16.46 c.u. (Fig. 3).

Rice. 11.3 Graphical interpretation of changes in the internal rate of return

When calculating the value of the internal rate of return, interpolation or extrapolation should be used. Having interpolated the values, we obtain the value of the internal rate of return in the amount of:

IRR = 15 + 5.64 / (5.64 + 16.46) = 15.226%.

Therefore, IRR = 15.226%.

Comparing the internal rate of return with the alternative interest rate, we conclude that the project under consideration offers a higher interest rate and, accordingly, can be successfully implemented.

All indicators calculated above characterize our project as profitable and economically viable. It should be noted that the project considered in the discounting system as positive is just as positive in the capitalization system. The net present value is equal to the net capitalized value adjusted to one point in time. All other indicators in the systems of discounting and capitalization are equal in value. The choice of a particular system is determined by the requirements and qualifications of the decision makers.