OMB
Circular No. A-94
APPENDIX
C
(Revised January 2003)
DISCOUNT
RATES FOR COST-EFFECTIVENESS, LEASE PURCHASE,
AND RELATED ANALYSES
Effective
Dates. This appendix is updated annually around the time of the
President's budget submission to Congress. This version of the appendix
is valid through the end of January 2004. A copy of the updated appendix
can be obtained in electronic form through the OMB home page at /omb/circulars/a094/a94_appx-c.html,
the text of the main body of the Circular is found at /omb/circulars/a094/a094.html,
and a table of past years' rates is located at /omb/circulars/a094/DISCHIST-2003.pdf.
Updates of the appendix are also available upon request from OMB’s
Office of Economic Policy (202-395-3381).
Nominal Discount
Rates. A forecast of nominal or market interest rates for 2003
based on the economic assumptions from the 2004 Budget are presented below.
These nominal rates are to be used for discounting nominal flows, which
are often encountered in lease-purchase analysis.
Nominal Interest
Rates on Treasury Notes and Bonds
of Specified Maturities (in percent)
3-Year
3.1
|
5-Year
3.6
|
7-Year
3.9
|
10-Year
4.2
|
30-Year
5.1
|
Real Discount
Rates. A forecast of real interest rates from which the inflation
premium has been removed and based on the economic assumptions from the
2004 Budget are presented below. These real rates are to be used for discounting
real (constant-dollar) flows, as is often required in cost-effectiveness
analysis.
Real Interest
Rates on Treasury Notes and Bonds
of Specified Maturities (in percent)
3-Year
1.6
|
5-Year
1.9
|
7-Year
2.2
|
10-Year
2.5
|
30-Year
3.2
|
Analyses of programs with terms different from those presented above
may use a linear interpolation. For example, a four-year project can be
evaluated with a rate equal to the average of the three-year and five-year
rates. Programs with durations longer than 30 years may use the 30-year
interest rate.
Other
Documents
Text of OMB
Circular No. A-94 in PDF (269k)
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