### 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**

**8C­i**

### 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.**

**8C­1**

### 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.2.2**  **presents 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**

**8C­2**

### 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,**  **and standard**  **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 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.2.2.** 

**8C­3**

### 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** 

**8C­4**