### APPENDIX 8C. HOUSEHOLD DISCOUNT RATE DISTRIBUTIONS

TABLE OF CONTENTS

8C.1 INTRODUCTION ...................................................................................................8C-1 8C.2 DISTRIBUTION OF REAL INTEREST RATES FOR CONSUMER DEBT CLASSES INCLUDING MORTGAGES ...............................................................8C-1 8C.3 DISTRIBUTION OF REAL INTERESTRATES FOR FINANCIAL ASSETS....8C-2

LIST OF TABLES
Table 8C.2.1 First Mortgages and Household Debt: Real Interest Rate Distributions.....8C-2 Table 8C.3.1 Household Assets: Time-Series of Real Interest Rates...............................8C-4

8C-i

### APPENDIX 8C. HOUSEHOLD DISCOUNT RATE DISTRIBUTIONS

8C.1 INTRODUCTION As discussed in section 8.2.4 of Chapter8, DOE characterized real interest rates associated with household mortgages, debt, andassets with probabilitydistributions. The sections below provide the probability distributions.

8C.2 DISTRIBUTION OF REAL INTEREST RATES FOR CONSUMER DEBT CLASSES INCLUDING MORTGAGES Table 8C.2.1 presents weighted distributions of the real effective interest rates for first mortgages and various household debt classes.As reported in sections 8.2.4.1 and 8.2.4.2 of Chapter 8, DOE used data from the Federal Reserve Board’sSurvey of Consumer Finances (SCF)in 1989, 1992, 1995, 1998, 2001, and 2004 to generate the probability distributions for first mortgages and household debt. The weightsassociated with each binned rate correspond to the share of each value among the surveyed households. DOE calculated the rates shown in Table 8C.2.1 by developing a similar table from each of the sixSCF surveys. DOE used the average value in each binned rate and then averaged across the sixSCF surveys to derive the values shown in Table 8C.2.1.

8C-1

### Table 8C.2.1First Mortgages and Household Debt: Real Interest Rate Distributions

1st MortgageHome Equity Credit Card Loans Installment Residence Other Credit Other Line of

Rate Weight Rate Weight RateWeight Rate Weight RateWeight RateWeight (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 0.4 5.4 0.4 10.0 0.0 4.4 0.0 34.1 0.2 12.8 0.1 4.2 1.6 13.0 1.5 7.1 1.4 1.2 1.4 2.1 1.5 6.3 1.5 2.3 2.5 28.1 2.5 12.7 2.6 1.7 2.4 4.2 2.5 6.9 2.5 1.6 3.5 26.5 3.5 23.4 3.5 3.4 3.4 5.4 3.5 12.1 3.5 4.9 4.4 17.8 4.5 19.2 4.5 4.5 4.5 5.4 4.5 15.3 4.6 5.6 5.4 5.0 5.4 13.6 5.5 5.2 5.6 6.7 5.5 19.2 5.6 12.5 6.4 2.3 6.4 5.2 6.6 6.8 6.6 7.1 6.5 14.3 6.7 10.4 7.4 0.9 7.5 4.2 7.4 4.3 7.5 3.5 7.5 6.5 7.6 5.5 8.5 0.4 8.5 2.0 8.6 5.5 8.6 4.1 8.6 2.9 8.6 8.3 9.4 0.2 9.5 1.1 9.6 5.7 9.5 3.7 9.4 1.6 9.5 9.3 10.5 0.1 10.5 0.6 10.6 5.5 10.6 3.2 10.6 0.4 10.5 7.9 11.7 0.1 11.8 0.2 11.5 6.2 11.5 1.9 11.6 0.5 11.6 6.6 12.4 0.1 12.7 0.3 12.5 5.2 12.5 2.7 12.6 0.5 12.5 6.7 13.3 0.0 13.4 0.1 13.6 4.8 13.5 1.8 14.8 0.4 13.5 1.9 14.4 0.0 14.7 0.2 14.7 9.2 14.7 3.8 15.7 0.1 14.7 3.5 16.9 0.0 15.0 0.0 15.6 7.8 15.6 1.8 16.6 0.3 15.6 2.2 23.2 0.0 17.0 17.5 42.7 0.0 0.0 0.1 16.4 17.6 18.4 19.3 20.4 21.4 22.5 23.6 24.6 25.5 26.3 36.9 6.1 5.7 1.9 2.3 1.1 0.4 0.3 0.1 0.2 0.2 0.1 0.0 16.4 17.6 18.5 19.4 20.5 21.4 22.2 23.4 24.6 25.2 26.6 27.8 28.4 29.3 43.6 44.3 47.2 2.1 1.9 1.3 0.7 0.7 0.3 0.2 0.3 0.4 0.2 0.0 0.0 0.0 0.1 0.0 0.0 0.0 17.9 0.1 16.4 17.4 18.5 19.1 20.2 21.1 22.1 23.5 2.5 1.0 0.3 1.4 1.0 0.0 0.2 0.3



### 8C.3 DISTRIBUTION OF REAL INTERESTRATES FOR FINANCIAL ASSETS Table 8C.2.2 presents the time series of realeffective interest rates associated with various household asset types.As reported in section 8.2.4.2 of Chapter 8, DOE used data from 8C-2

### the various sources to generate the probability distributions for each of the asset types identified in Table 8C.2.2. For each asset, the average,minimum, maximum, andstandard deviation are provided. DOE developed probability distributions based on the average value and standard deviation. Because the use of the standard deviations yield distributions with negative values, DOE truncated the lower end of the normal distribution at a discount rateof zero. DOE also truncated the higher end of the normal distribution in equal proportion to the truncation at the lower end to maintain the average values above in Table 8C.2.2.

8C-3

### Table 8C.3.1Household Assets: Time-Series of Real Interest Rates

Year Savings Accounts (%) CDs 6 Months (%) Treasury Savings Bonds

(%) Corp AAA Bonds

(%) Stocks S&P 500 (%) Mutual Funds

(%) 1977

- -0.6 1.2 1.4 -12.7 -8.0 1978

- 0.9 0.8 1.1 -1.0 -0.4 1979

- 0.1 -1.9 -1.5 6.4 3.7 1980

- -0.5 -2.0 -1.4 16.1 10.1 1981

- 5.0 2.8 3.5 -13.6 -8.1 1982

- 6.0 6.2 7.2 13.4 11.0 1983

- 5.9 7.7 8.6 18.5 14.9 1984 5.5 6.1 7.8 8.0 1.8 3.8 1985 5.4 4.5 7.0 7.5 26.7 20.1 1986 6.0 4.6 5.8 7.0 16.3 12.8 1987 3.3 3.2 4.8 5.5 2.1 3.0 1988 3.1 3.6 4.6 5.4 11.9 9.5 1989 3.0 4.1 3.5 4.2 25.4 18.1 1990 2.4 2.6 3.0 3.7 -8.0 -4.3 1991 2.7 1.6 3.8 4.4 25.0 17.9 1992 2.1 0.7 4.5 5.0 4.4 4.4 1993 1.1 0.3 3.5 4.1 6.8 5.7 1994 1.3 2.3 4.7 5.3 -1.2 0.8 1995 2.2 3.1 3.9 4.6 33.4 23.6 1996 2.0 2.4 3.6 4.3 20.3 14.7 1997 2.7 3.4 4.2 4.9 28.9 20.7 1998 3.4 3.8 4.0 4.9 26.4 18.9 1999 2.3 3.2 3.6 4.7 18.3 13.4 2000 1.7 3.1 2.5 4.1 -12.0 -7.2 2001 1.8 0.8 2.6 4.1 -14.3 -8.7 2002 1.3 0.2 3.8 4.8 -23.2 -14.2 2003 -0.2 -1.1 2.6 3.3 25.6 17.9 2004 -0.7 -0.9 2.3 2.9 7.8 6.0 2005 -0.6 0.3 1.2 1.8 1.4 1.3 2006 0.8 2.0 1.6 2.3 12.0 8.6 Average 2.3 2.4 3.5 4.2 8.8 7.0 Minimum -0.7 -1.1 -2.0 -1.5 -23.2 -14.2 Maximum 6.0 6.1 7.8 8.6 33.4 23.6

Std. Dev. 1.7 2.1 2.3 2.4 15.0 10.2

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