Some Damages Experts Incorrectly Compute Real Discount Rates
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- 1. Some Damages Experts Incorrectly Compute Real Discount Rates
In calculating economic losses that occur after some date, for instance, lost wages after the date of trial, it is necessary to compute the present value of all such future values. In some courts, a below-market interest rate is used to compute said present values. A below-market discount rate is generally derived as the nominal interest yield on an investment instrument adjusted for anticipated inflation. (A nominal interest rate refers to the rate of interest prior to taking inflation into account. A real interest rate refers to the rate of interest after removing the effects of inflation.)