Question

Select all the answers that apply. A discount rate... is used to reduce the loss generated...

Select all the answers that apply. A discount rate...

is used to reduce the loss generated by climate change in money terms by the length of time that passes before these damages are felt.

aggregates the impact of climate change over time in one value.

disaggregates the damage function.

is arbitrary in IAMs.
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Answer #1

The correct answers are:

A). is used to reduce the loss generated by climate change in money terms by the length of time that passes before these damages are felt.

B). aggregates the impact of climate change over time in one value.

D). is arbitrary in IAMs

The definition of a discount rate depends on the context, it's either defined as the interest rate used to calculate the net present value or the interest rate charged by the Federal Reserve Bank. There are two discount rate formulas you can use to calculate discount rate, WACC (weighted average cost of capital) and APV (adjusted present value).

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