### APPENDIX 8D. HOUSEHOLD DISCOUNT RATE DISTRIBUTIONS

TABLE OF CONTENTS

8D.1 INTRODUCTION .................................................................................................. 8D-1

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

CLASSES INCLUDING MORTGAGES .............................................................. 8D-1

8D.3 DISTRIBUTION OF REAL INTEREST RATES FOR FINANCIAL ASSETS... 8D-2

LIST OF TABLES

Table 8D.2.1 First Mortgages and Household Debt: Real Interest Rate Distributions.... 8D-2

Table 8D.3.1 Household Assets: Time-Series of Real Interest Rates.............................. 8D-4

8D-i

### APPENDIX 8D. HOUSEHOLD DISCOUNT RATE DISTRIBUTIONS

8D.1	 INTRODUCTION

As discussed in section 8.2.4 of Chapter 8, DOE characterized real interest rates

associated with household mortgages, debt, and assets with probability distributions. The

sections below provide the probability distributions.

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

CLASSES INCLUDING MORTGAGES

Table 8D.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’s Survey of Consumer Finances

(SCF) in 1989, 1992, 1995, 1998, 2001, and 2004 to generate the probability distributions for

first mortgages and 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 8D.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 8D.2.1.

8D-1

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

Installment Other Other Line of

1st Mortgage Home Equity Credit Card Loans Residence Credit

Rate Weight Rate Weight Rate Weight Rate Weight Rate Weight Rate Weight

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

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 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



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

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

various household asset types. As reported in section 8.2.4.2 of Chapter 8, DOE used data from

8D-2

### the various sources to generate the probability distributions for each of the asset types identified

in Table 8D.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 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 8D.3.1.

8D-3

### Table 8D.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

(%)

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

2007 1.9 2.3 1.9 2.6 2.6 2.4

Average 2.3% 2.4% 3.4% 4.1% 8.6% 6.8%

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% 2.3% 14.8% 10.1%



### 8D-4