APPENDIX 8C. RESIDENTIAL DISCOUNT RATE DISTRIBUTIONS

TABLE OF CONTENTS

8C.1 INTRODUCTION ...................................................................................................8C­1

8C.2 DISTRIBUTION OF REAL INTEREST RATES FOR CONSUMER DEBT

CLASSES ................................................................................................................8C­1

8C.3 DISTRIBUTION OF REAL INTEREST RATES FOR FINANCIAL ASSETS....8C­2

LIST OF TABLES

Table 8C.2.1 Household Debt: Real Interest Rate Distributions......................................8C­2

Table 8C.3.1 Household Assets: Time­Series of Real Interest Rates...............................8C­4

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EE-2006-STD-0131 COMMENT 37.2
APPENDIX 8C. HOUSEHOLD DISCOUNT RATE DISTRIBUTIONS

8C.1 INTRODUCTION

As discussed in Chapter 8, DOE characterized real interest rates associated with

household debt and assets with probability distributions to develop a residential discount rate.

The sections below provide the probability distributions.

8C.2 DISTRIBUTION OF REAL INTEREST RATES FOR CONSUMER DEBT

CLASSES

Table 8C.2.1 presents weighted distributions of the real effective interest rates for various

household debt classes. As reported in Chapter 8, DOE used data from the Federal Reserve

Board’s Survey of Consumer Finances (SCF) in 1989, 1992, 1995, 1998, 2001, and 2004 to

generate the probability distributions for household debt. The weights associated 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 six

SCF surveys. DOE used the average value in each binned rate and then averaged across the six

SCF surveys to derive the values shown in Table 8C.2.1.

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EE-2006-STD-0131 COMMENT 37.2
Table 8C.2.1 Household Debt: Real Interest Rate Distributions

Installment Other Other Line of

Home Equity Credit Card Loans Residence Credit

Rate Weight Rate Weight Rate Weight Rate Weight Rate Weight

(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

0.4 10.0 0.0 4.4 0.0 34.1 0.2 12.8 0.1 4.2

1.5 7.1 1.4 1.2 1.4 2.1 1.5 6.3 1.5 2.3

2.5 12.7 2.6 1.7 2.4 4.2 2.5 6.9 2.5 1.6

3.5 23.4 3.5 3.4 3.4 5.4 3.5 12.1 3.5 4.9

4.5 19.2 4.5 4.5 4.5 5.4 4.5 15.3 4.6 5.6

5.4 13.6 5.5 5.2 5.6 6.7 5.5 19.2 5.6 12.5

6.4 5.2 6.6 6.8 6.6 7.1 6.5 14.3 6.7 10.4

7.5 4.2 7.4 4.3 7.5 3.5 7.5 6.5 7.6 5.5

8.5 2.0 8.6 5.5 8.6 4.1 8.6 2.9 8.6 8.3

9.5 1.1 9.6 5.7 9.5 3.7 9.4 1.6 9.5 9.3

10.5 0.6 10.6 5.5 10.6 3.2 10.6 0.4 10.5 7.9

11.8 0.2 11.5 6.2 11.5 1.9 11.6 0.5 11.6 6.6

12.7 0.3 12.5 5.2 12.5 2.7 12.6 0.5 12.5 6.7

13.4 0.1 13.6 4.8 13.5 1.8 14.8 0.4 13.5 1.9

14.7 0.2 14.7 9.2 14.7 3.8 15.7 0.1 14.7 3.5

15.0 0.0 15.6 7.8 15.6 1.8 16.6 0.3 15.6 2.2

17.0 0.0 16.4 6.1 16.4 2.1 17.9 0.1 16.4 2.5

17.5 0.0 17.6 5.7 17.6 1.9 17.4 1.0

42.7 0.1 18.4 1.9 18.5 1.3 18.5 0.3

19.3 2.3 19.4 0.7 19.1 1.4

20.4 1.1 20.5 0.7 20.2 1.0

21.4 0.4 21.4 0.3 21.1 0.0

22.5 0.3 22.2 0.2 22.1 0.2

23.6 0.1 23.4 0.3 23.5 0.3

24.6 0.2 24.6 0.4

25.5 0.2 25.2 0.2

26.3 0.1 26.6 0.0

36.9 0.0 27.8 0.0

28.4 0.0

29.3 0.1

43.6 0.0

44.3 0.0

47.2 0.0

8C.3 DISTRIBUTION OF REAL INTEREST RATES FOR FINANCIAL ASSETS

Table 8C.3.1presents the time series of real effective interest rates associated with various

household asset types. As reported in Chapter 8, DOE used data from the various sources to

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EE-2006-STD-0131 COMMENT 37.2
generate the probability distributions for each of the asset types identified in Table 8C.3.1. For

each asset, the average, minimum, maximum, and standard deviation are provided. DOE

developed probability distributions based on the average value and standard deviation. Because

the use of the standard deviations yields distributions with negative values, DOE truncated the

lower end of the normal distribution at a discount rate of 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.3.1.

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EE-2006-STD-0131 COMMENT 37.2
Table 8C.3.1 Household Assets: Time­Series 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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