Considerations In The Choice Of The Appropriate Discount Rate For Evaluating Sovereign Debt Restructuring

Download or read book Considerations in the Choice of the Appropriate Discount Rate for Evaluating Sovereign Debt Restructurings written by Ms.Julie Kozack and published by International Monetary Fund. This book was released on 2005-12-01 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Assessments regarding the effectiveness of sovereign debt restructurings are often summarized by comparisons of the net present value of debt service before and after the restructuring. These calculations are inherently sensitive to the choice of discount rate. This paper explores issues that arise in selecting discount rates when evaluating sovereign debt restructurings. It suggests using a range of discount rates and centering the analysis around the internal rate of return to assess whether the debt restructuring has generated net present value savings or costs to the debtor.