8 C

- i



### APPENDIX 8C. RESIDENTIAL DISCOUNT RATE DISTRIBUTIONS

TABLE OF CONTENTS

8C.1 INTRODUCTION ................................................................................................... 8C-1

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

CLASSES ................................................................................................................ 8C-1

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

LIST OF TABLES

Table 8C.2.1 Household Debt: Real Interest Rate Distributions .......................................8C-2

Table 8C.3.1 Household Assets: Time Series of Real Interest Rates ................................8C-48C

- 1 

### APPENDIX 8C. HOUSEHOLD DISCOUNT RATE DISTRIBUTIONS

8C.1 INTRODUCTION

As discussed in chapter 8 of this preliminary technical support document (TSD), the U.S.

De partment of Energy ( DOE ) characterized real interest rates associated with household debt and

assets with probability distributions to develop a residential discount rate. The sections below

pr ovide 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 class es . As reported in chapter 8 of this TSD, DOE used data from the Federal

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

2007

, and 2010 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. The bins correspond to all consumers who report a rate between two of the discrete

leve ls in Table 8C.2.1 ( i.e. , the 0.0 bin represents all consumers with a rate between 0.0 and 0.5).

DOE calculated the rates shown in Ta ble 8C.2.1 by developing a similar table from each of the

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

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

.8C

- 2



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

Home Equity Credit Card Installment

Loans Other Residence Other Line of

Credit

Rate

(%) Weight

(%) Rate

(%) Weight

(%) Rate

(%) Weight

(%) Rate

(%) Weight

(%) Rate

(%) Weight

(%)

0.0 5.3 0.0 5.7 0.0 36.7 0.0 1.6 0.0 3.5

0.5 8.6 0.5 1.1 0.5 1.6 0.5 2.1 0.5 3.7

1.5 10.2 1.5 1.6 1.5 2.4 1.5 6.7 1.5 3.5

2.5 11.8 2.5 2.3 2.5 4.3 2.5 15.5 2.5 5.6

3.5 20.8 3.5 3.2 3.5 3.5 3.5 18.5 3.5 5.2

4.5 2 1.4 4.5 4.4 4.5 4.4 4.5 19.2 4.5 11.6

5.5 14.0 5.5 5.9 5.5 5.2 5.5 16.1 5.5 10.7

6.5 3.4 6.5 6.5 6.5 6.4 6.5 10.4 6.5 8.3

7.5 2.5 7.5 3.2 7.5 2.6 7.5 4.3 7.5 4.8

8.5 0.3 8.5 6.6 8.5 3.6 8.5 2.8 8.5 10.1

9.5 0.7 9.5 5.9 9.5 2.5 9.5 0.8 9.5 6.4

10.5 0.0 10.5 5.7 10.5 3.2 10.5 0.4 10.5 4.5

11.5 0.2 11.5 5.7 11.5 1.3 11.5 0.4 11.5 5.6

12.5 0.2 12.5 4.5 12.5 2.2 12.5 0.3 12.5 3.9

13.5 0.2 13.5 4.6 13.5 1.6 13.5 0.1 13.5 1.4

14.5 0.2 14.5 11.6 14.5 4.7 14.5 0.3 14.5 4.1

15.5 0.1 15.5 8.4 15.5 2.8 15.5 0.2 15.5 2.5

16.5 0. 0 16.5 3.3 16.5 1.8 16.5 0.1 16.5 1.0

17.5 0.0 17.5 3.9 17.5 2.2 17.5 0.1 17.5 0.4

18.5 2 .0 18.5 1.5 18.5 0.0 18.5 1.1

19.5 1.2 19.5 1.2 19.5 0.0 19.5 0.6

20.5 0 .8 20.5 1.0 20.5 0.0 20.5 0.5

21.5 0 .5 21.5 1.1 21.5 0.0 21.5 0.6

22.5 0 .3 22.5 0.4 22.5 0.0 22.5 0.3

23.5 0 .2 23.5 0.1 23.5 0.0

24.5 0.4 24.5 0.8 24.5 0.1

25.5 0 .3 25.5 0.0

26.5 0.0 26.5 0.0

27.5 0.0 27.5 0.0

28.5 0 .0 28.5 0.1

29.5 0.0 29.5 0.0

30.5 0 .0 30.5 0.0

31.5 0.0 31.5 0.0

32.5 0 .0 32.5 0.0

33.5 0.0 33.5 0.0

34.5 0 .0 34.5 0.0

35.5 0 .0 35.5 0.1

36.5 0.0 36.5 0.0

37.5 0.0

38.5 0.0

39.5 0.58C

- 3



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

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

various household asset types. As reported in chapter 8 of this TSD , DOE used data from the

various sources to 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,

DO E 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

.8C

- 4



### Table 8C.3.1 Household 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

( % )

1982

- 6.0 8.0 7.2 13.4 11.3

1983

- 5.9 8.4 8.6 18.5 15.2

1984 5.5 6.1 7.9 8.0 1.8 3.9

1985 5.3 4.5 7.5 7.5 26.7 20.3

1986 6.0 4.6 7.2 7.0 16.3 13.2

1987 3.3 3.2 5.7 5.5 2.1 3.2

1988 3.1 3.6 5.3 5.4 11.9 9.7

1989 3.0 4.1 4.0 4.2 25.4 18.4

1990 2.4 2.6 3.5 3.7

- 8.0

- 4.1

1991 2.7 1.6 4.2 4.4 25.0 18.1

1992 2.1 0.7 4.9 5.0 4.4 4.6

1993 1.1 0.3 3.9 4.1 6.8 5.9

1994 1.3 2.3 5.0 5.3

- 1.2 1.0

1995 2.2 3.1 4.5 4.6 33.4 23.8

1996 2.0 2.4 4.2 4.3 20.3 14.9

1997 2.7 3.4 4.6 4.9 28.9 20.9

1998 3.4 3.8 4.8 4.9 26.4 19.2

1999 2.3 3.2 4.5 4.7 18.3 13.8

2000 1.7 3.1 3.8 4.1

- 12.0

- 6.6

2001 1.8 0.8 3.5 4.1

- 14.3

- 8.2

2002 1.3 0.2 4.6 4.8

- 23.2

- 13.8

2003

- 0.2

- 1.1 3.4 3.3 25.5 18.1

2004

- 0.7

- 0.9 3.0 2.9 7.9 6.2

2005

- 0.2 0.3 1.9 1.8 1.4 1.5

2006 1.1 2.0 2.1 2.3 12.0 8.8

2007 2.0 2.3 2.5 2.6 2.6 2.6

2008 0.2

- 0.7 2.1 1.7

- 38.9

- 25.4

2009 3.6 1.2 6.1 5.7 26.4 19.5

2010 0.6

- 1.2 3.6 3.2 13.0 9.7

2011

- 1.0

- 2.7 2.3 1.4

- 1.1

- 0.2

Average 2.1 2.1 4.6 4.6 7.6 6.9

Minimum

- 1.0

- 2.7 1.9 1.4

- 38.9

- 25.4

Maximum 6.0 6.1 8.4 8.6 33.4 23.8

Std. Dev. 1.7 2.3 1.8 1.8 16.8 11.4